Question:
A free good has which one of the following characteristics?
(1) It has some degree of scarcity in relation to demand.
(2) It has no opportunity cost in supply.
(3) Its consumption or production does not generate any externality.
(4) It is supplied by the government free of charge.
(5) It is supplied by the government itself because its consumption is socially desirable.
Correct Answer:
(2)
Answer Explanation:
A free good is so abundant in nature that there is enough to satisfy all human wants at a zero price. Because it is not scarce, producing or consuming more of it does not require sacrificing another good, meaning its opportunity cost is zero.
Topic: Introduction Year: 2020
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