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.

Explanation

Option (c) is correct

• Opportunity cost refers to the cost of the next best alternative foregone when a choice is made.
• Even when the government provides a commodity “free” to the public, there is still a cost involved, but it is not directly borne by the consumers of the product. Instead, it is covered through public funds, which are collected from taxpayers. In such a scenario, the opportunity cost is transferred from the direct consumers of the product to the tax-paying public, as the government uses tax revenue to cover the costs of providing the commodity.
• Example: Consider a government providing free healthcare to its citizens. For individuals receiving healthcare services, it may seem there is no direct cost. However, the cost of providing healthcare (e.g., hospitals, staff salaries, medical supplies) is funded by public taxes. Thus, the opportunity cost of the resources used in healthcare is borne by taxpayers rather than the direct beneficiaries of the service. Taxpayers could have spent their money elsewhere, but the government instead uses it to provide these services. Hence, the cost of the resources (the opportunity cost) is transferred from the consumers of the free healthcare to the tax-paying public.

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Answer: (c) The opportunity cost is transferred from the consumers of the product to the tax-paying public; Difficulty Level: Medium