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

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the opportunity cost is zero.

the opportunity cost is ignored.

the opportunity cost is transferred from the consumers of the product to the tax-paying public.

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

Answer is Right!

Answer is Wrong!

This question was previously asked in

UPSC IAS – 2018

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The correct answer is C.

Opportunity cost is the value of the next-best alternative use of resources. When the government provides a commodity for free, the resources used to produce or acquire that commodity are not free from the perspective of society or the economy. Those resources (labor, materials, capital) could have been used to produce other goods or services. The cost of these foregone alternatives is the opportunity cost. Since the consumer doesn’t pay for the commodity, the burden of this opportunity cost (funding the production/acquisition) is shifted to the general public, primarily through taxes. Taxpayers pay for the resources used by the government, effectively bearing the opportunity cost that consumers would have borne through direct payment.

Option A is incorrect because resources have alternative uses, hence the opportunity cost is not zero. Option B is incorrect because while consumers might ignore the opportunity cost personally, it exists from society’s perspective. Option D is partially correct in that the cost is borne by the government budget, but it is more precise to say the cost is transferred *from* the consumers *to* the tax-paying public, who fund the government budget.

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