The diagram below shows the supply and demand diagrams for the competitive market for honey in one region.MC0 represents private marginal cost and MB0 represents private marginal benefit.
FIGURE 16- 3
-Refer to Figure 16- 3.Assume there are two types of firms in this region - beekeepers that produce honey and orchard keepers that produce peaches.The bees provide a benefit to the orchard keepers by pollinating their peach trees.If the external marginal benefit is $4 per unit of honey,then what is the allocatively efficient output?

Question

The diagram below shows the supply and demand diagrams for the competitive market for honey in one region.MC0 represents private marginal cost and MB0 represents private marginal benefit.
  FIGURE 16- 3
-Refer to Figure 16- 3.Assume there are two types of firms in this region - beekeepers that produce honey and orchard keepers that produce peaches.The bees provide a benefit to the orchard keepers by pollinating their peach trees.If the external marginal benefit is $4 per unit of honey,then what is the allocatively efficient output?

Quizplus · Accepted Answer

The allocatively efficient output occurs where private marginal cost (MC0) equals the total marginal benefit (private marginal benefit + external marginal benefit). In this case, at an output of 100 kg.

The Diagram Below Shows the Supply and Demand Diagrams for the Competitive