What is the most elizabeth would be willing to pay dan

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Reference no: EM133659719

Problem: Dan's 1,000-acre almond farm is next door to Elizabeth's 50-acre cherry farm. Dan's rents 2,000 colonies of honeybees. Some of the bees from Dan's farm also fly around Elizabeth's orchard and raise the cherry yield from 100 boxes per acre to 125 boxes per acre. Each box of cherries sells for $20. Elizabeth rents no colonies and relies on the bees from Dan's to pollinate her cherries. The fact that the bees spend some time at Elizabeth's orchard has no effect on Dan's almond farm production. Is there an externality in the situation above? Explain. How valuable is this externality? Explain and show calculations. Dan now notices that some of the bees from the hives he has rented fly next door to benefit Elizabeth's orchard and asks for payment. What is the most Elizabeth would be willing to pay Dan? Explain.

Reference no: EM133659719

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