The answer is C. When economists talk about scarce resources or scarcity, they mean that there is a condition that resources are limited while wants are unlimited. Because resources were used on the free goods, those resources could have been used on something else. The other use of the resources is the opportunity cost of the free goods. Since all production has an opportunity cost, there really is no such thing as a free item. The items aren't even free to the consumer, since the consumer could have been doing something else with their time to acquire the free items. For example, say a restaurant was giving out free meals. A consumer who received the free meal did not use their money to get the meal, but they did use their time that they could have used for something else.

As mentioned in the explanation for the correct answer, answer A can't be true since all production and consumption has a cost. Answer B is the definition of profit or utility maximization. It is an important concept in economics, but doesn't answer the question of free items and their cost. Answer D isn't correct since society does assign a value to free goods. If consumers line up to get the free items, society did value the free items by using their time to acquire them.