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.

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.

Quizplus · Accepted Answer

The externality is positive because the bees pollinate the peach trees, benefiting the orchard keepers. MB2 represents the social marginal benefit, which includes both private and external benefits.

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