Essentials of Economics 2nd Edition by Campbell McConnell, Randy Grant, Stanley Brue

Exercise 6

An apple grower's orchard provides nectar to a neighbor's bees, while the beekeeper's bees help the apple grower by pollinating the apple blossoms. Use Figure 5.1b to explain why this situation of dual positive externalities might lead to an underallocation of resources to apple growing and to beekeeping. How might this underallocation get resolved via the means suggested by the Coase theorem