Scarcity, Choice and Opportunity Cost: Question 5

Worked solution

Step 1: Recall the test for a free good

A good is a free good only if it passes two conditions together: producing or providing it uses no scarce resource with an alternative use, and one person enjoying it does not reduce how much is available to anyone else. If either condition fails, it is instead an economic good, because scarce resources have been used to provide it and so it carries a positive opportunity cost.

Step 2: Test option B against this definition

Sunlight falling on a public beach requires no labour, capital or land to be “produced”. It simply exists. One person sunbathing does not reduce the amount of sunlight available to anyone else on the beach. Both conditions hold, so this is a genuine free good.

Step 3: Rule out the other options

• Option A (bottled spring water) is an economic good: although the water occurs naturally, extracting, purifying, bottling and transporting it for sale all use scarce labour and capital that could have been used elsewhere.
• Option C (an on-street parking permit) is an economic good: the number of permits is limited, so issuing one to a particular driver means it cannot also be issued to another driver. This is a scarce resource with an alternative use.
• Option D (state-funded primary education) is an economic good, even though parents pay no direct price: teaching it still requires scarce teachers, buildings and materials that could have been used to produce something else. “Free at the point of use” is not the same as “a free good” in the economic sense.

Final answer

Only sunlight on the beach requires no scarce resource and is non-rival between sunbathers, making it the true free good, option B. The other three are economic goods, each requiring scarce resources with a positive opportunity cost.