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. We can say that there is a ________ externality in the production of honey. The curve ________represents the ________ marginal benefit of honey.
A)positive; MB1; social
B)negative; MB1; private
C)negative; MB2; social
D)positive; MB2; social
E)positive; MB2; private

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. We can say that there is a ________ externality in the production of honey. The curve ________represents the ________ marginal benefit of honey.
A)positive; MB1; social 
B)negative; MB1; private 
C)negative; MB2; social 
D)positive; MB2; social 
E)positive; MB2; private

Quizplus · Accepted Answer

The correct answer is D) positive; MB2; social. This is because the bees from the beekeepers provide a benefit to the orchard keepers by pollinating their peach trees, which is an example of a positive externality. The curve MB2 represents the social marginal benefit of honey, which includes both the private benefits to the beekeepers and the external benefits to the orchard keepers.

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