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CMA Foundation · Fundamentals of Business Economics and Management · The Fundamentals of Economics

Which of the following is a feature of a good that is classified as an economic good rather than a free good?

An economic good is one that is scarce relative to the demand for it and therefore commands a price and involves an opportunity cost. A free good is available in unlimited quantity without effort. Both give utility, and the producer's identity does not decide the classification.

  1. AIt is scarce relative to demand and commands a priceCorrect
  2. BIt is available in unlimited quantity without any effort
  3. CIt gives no utility to consumers
  4. DIt is produced only by the government

Explanation

Economic goods are scarce relative to the wants for them and so have a price and an opportunity cost. Free goods like air in normal conditions are available in abundance without cost. Utility is present in both kinds of good, and who produces the good does not decide its classification.

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