In which of the following situations do we have a free good?
In which of the following situations do we have a free good?
- A) at zero price, more is demanded than supplied
- B) at zero price, quantity supplied exceeds quantity demanded
- C) at equilibrium price, quantity supply is equal to quantity demanded
- D) any quantity can be obtained when the price is low
Correct Answer: B) at zero price, quantity supplied exceeds quantity demanded
Explanation
This question is asking about a free good and which situation represents a free good. A free good is a good that is available in abundance and has no opportunity cost. In other words, it is a good that can be obtained without paying a price.
Option A states that when more is demanded than supplied at zero price, we have a free good. This is incorrect because if there is more demand than supply, it means the good is scarce and not freely available.
Option C states that at equilibrium price, quantity supply is equal to quantity demanded. This does not represent a free good because there is still a price attached to it.
Option D states that any quantity can be obtained when the price is low. This does not represent a free good because there is still a price attached to it.
Option B states that at zero price, quantity supplied exceeds quantity demanded. This represents a free good because it is available in abundance and there is no price attached to it. Examples of free goods include air, sunlight, and water from natural sources.
In summary, the correct answer is Option B, which represents a free good. To learn more about this, please read the relevant sections of the recommended textbooks.