What is the value of the externality

Reference no: EM13178572

A beekeeper, Yung, lives next to an apple orchard. She is not only benefits from the bees' honey, which she sells, but she sells, but she also creates a positive externality for her apple grower neighbor: Yung's bees help pollinate the apple trees so the apple grower can grow more apples. Yung's total cost and benefit for keeping her bees is the following:

Price per 1000 bees 27 24 23 21 18 15 12

Quantity of bees demanded 1 2 3 4 5 6 7

Quantity of bees supplied 9 8 7 6 5 4 3

Ignoring the externality, how many bees will be kept?

If the apple grower wants to see 6,000 bees kept, what is the value of the externality? What would have to happen for the socially optimal amount of bees to be kept?

Reference no: EM13178572

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