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4) The firm, BeezRUs, makes different types of honey using honeybees. Next to them is a company, BelleFleur which grows flowers out in the fields
4) The firm, BeezRUs, makes different types of honey using honeybees. Next to them is a company, BelleFleur which grows flowers out in the fields next to the beehives. The bees pollinate the flowers, and the flowers are more abundant because of the bees. Suppose the following figure shows the marginal private cost (MPC) and marginal social cost (MSC) of BeezRUs's honey production. a) If BeezRUs only considers its private cost, what is the deadweight loss created? For this question and the remaining ones, you can indicate the answer by describing the area on the graph, for example "the rectangle whose area is (bc)e." b) What is the value of the positive externality granted to BelleFleur when BeezRUs chooses its production level when it takes the full social cost into consideration? c) Why doesn't BeezRUs choose its production level by considering the social cost? d) What minimum transfer is needed between BelleFleur and BeezRUs is needed to produce the socially optimal amount? Who transfers to who? 4) The firm, BeezRUs, makes different types of honey using honeybees. Next to them is a company, BelleFleur which grows flowers out in the fields next to the beehives. The bees pollinate the flowers, and the flowers are more abundant because of the bees. Suppose the following figure shows the marginal private cost (MPC) and marginal social cost (MSC) of BeezRUs's honey production. a) If BeezRUs only considers its private cost, what is the deadweight loss created? For this question and the remaining ones, you can indicate the answer by describing the area on the graph, for example "the rectangle whose area is (bc)e." b) What is the value of the positive externality granted to BelleFleur when BeezRUs chooses its production level when it takes the full social cost into consideration? c) Why doesn't BeezRUs choose its production level by considering the social cost? d) What minimum transfer is needed between BelleFleur and BeezRUs is needed to produce the socially optimal amount? Who transfers to who
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