UPSC Previous Year Question | Prelims GS | 2018

If a commodity is provided free to the public by the Government, then:

  1. the opportunity cost is zero.
  2. the opportunity cost is ignored.
  3. the opportunity cost is transferred from the consumers of the product to the tax-paying public.
  4. the opportunity cost is transferred from the consumers of the product to the Government.

Answer

Correct Answer

the opportunity cost is transferred from the consumers of the product to the Government.

Explanation

Opportunity cost never becomes zero: resources used to provide the free commodity could have been used elsewhere. For consumers it is no longer a direct cost, and the burden shifts to the Government that decides to provide it (UPSC's answer key marks option d).

Topics: basic economic concepts, economy, microeconomics, opportunity cost of free public goods