Assume there are 100 bee keepers raising honeybees in North Carolina. Each bee keeper has a supply curve of qS = P/2 - 1, where quantity is measured in thousands of jars of honey. Assume market demand for honey can be represented by QD = 20 - 10P.

a. What will be the price and quantity in the market? Draw a supply and demand diagram and indicate the equilibrium price and quantity while making sure to label your axes and intercepts.

Now assume that each jar of honey produced generates $2 of benefit to society from the honeybees pollinating the crops and flowers at nearby farms.

b. Label the MSC, MSB, MPC, and MPB curves in this market on your diagram from part (a). Calculate and label the efficient quantity of honey in the market. Does the market over-produce or under-produce?

c. Explain why it might be a good idea for the government to intervene in this market. What would be the optimal policy for them to enact and why?