The diagram below shows the supply and demand diagrams for the competitive market for honey in one region.MC 0 represents private marginal cost and MB 0 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 government subsidizes the beekeepers so as to fully internalize the externality,the equilibrium price of honey would be ________ and the allocatively efficient output would be ________.
A)3; 80
B)5; 100
C)7; 100
D)9; 60
E)11; 80

Question

The diagram below shows the supply and demand diagrams for the competitive market for honey in one region.MC 0 represents private marginal cost and MB 0 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 government subsidizes the beekeepers so as to fully internalize the externality,the equilibrium price of honey would be ________ and the allocatively efficient output would be ________.
A)3; 80 
B)5; 100 
C)7; 100 
D)9; 60 
E)11; 80

Quizplus · Accepted Answer

The subsidy internalizes the positive externality, leading to a lower equilibrium price of honey ($5) and a higher allocatively efficient output (100 units).

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