Q47 · UPSC Prelims 2018 · Set A · Economy

← Q46 Q48 →

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.

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

Explanation

  1. A

    the opportunity cost is zero.

    (a) Opportunity cost is zero. Free-to-user is not free-to-society; resources still have alternative uses. This is not the key.

  2. B

    the opportunity cost is ignored.

    (b) Opportunity cost is ignored. Good public accounting should not ignore it; the economic cost still exists. This is not the key.

  3. C

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

    (c) Opportunity cost is transferred from the consumers of the product to the tax-paying public. (c) Official key: If government supplies a good at zero price, taxpayers (or other public funds) bear the real resource cost that consumers no longer pay. That transfer is the stored key.

  4. D

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

    (d) Opportunity cost is transferred to the Government. The Government is an agent; the burden falls on the public that finances it, not on a costless entity called Government. This is not the key.

Summary. Official key is (c). A zero user-price does not erase opportunity cost; it shifts it onto taxpayers. The cost is neither zero nor merely ‘ignored’, nor parked on government as if government were not funded by the public. Honour the stored letter (c).

PYQ trend

When UPSC asked this

Related PYQs from other years, newest first. Open a question to read it.

  1. 2015 · Q60 · General Studies · 2 marks

    With reference to the Union Government, consider the following statements: 1. The Department of Revenue is responsible for the preparation of Union Budget that is presented to the Parliament. 2. No amount can be withdrawn from the Consolidated Fund of India without the authorization from the Parliament of India. 3. All the disbursements made from Public Account also need the authorization from the Parliament of India. Which of the statements given above is/are correct?

    View answer →