63Alice keeps a bee farm next to an apple orchard. She chooses the optimal number of hives by selecting the honey output level that maximizes her profit. Alice's bees help to pollinate the blossoms in the apple orchard next to her, increasing the fruit yield. Thus

the local government taxes honey production.

the private market provides the socially desirable output of honey.

too much honey is produced.

too little honey is produced.

64Assume dairy farmers saw high profits the previous year and expanded their herds. Consider the market for milk. Ceteris paribus, what happened to dairy farmers' willingness-to-produce milk and to the amount of producer surplus, assuming demand held steady and the market sells at the equilibrium price?

They both decrease.

They both increase.

The willingness-to-produce falls and producer surplus rises.

The willingness-to-produce rises and producer surplus falls.

58

(Figure: Determining Surplus 6) Using the graph, we can calculate the maximum possible consumer surplus as Market for Hot Dogs 4.50 4.00Q 3.50 3.00 2.50 Price ($) 2.00 1.50 1.00 0.50 10 20 30 50 Quantity (thousands) O $80,000. O $10,000. $20,000. $40,000