Question
If a commodity is provided free to the public by the Government, then
(a) the opportunity cost is zero.
(b) the opportunity cost is ignored.
(c) the opportunity cost is transferred from the consumers of the product to the tax-paying public.
(d) the opportunity cost is transferred from the consumers of the product to the Government.
Answer:
C
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Explanation:
When a commodity is provided for free by the government, it means that the consumers do not have to pay for it directly. However, the production and distribution of that commodity still incur costs, which are covered by the government using tax revenues. This means that the opportunity cost, which represents the value of the next best alternative foregone, is transferred from the consumers of the product to the tax-paying public. In other words, the public bears the cost of providing the free commodity through their tax contributions.