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 products to the Government.

Answer 1

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

From the finite money available, Government could build a street light or a water tap. So, opportunity cost is involved in pursuing either one of the activity. Experts were divided over C or D-some interpreting that opportunity cost is borne by the Decision Maker, while others saying opportunity cost is borne by the person who eventually pays for it.

Answer 2

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

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