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Amanda keeps bees to produce honey
Amanda keeps bees to produce honey. Each hive produces $350 worth of honey each month. The table below shows Amanda's marginal cost of tending each bee hive and her private marginal benefit, which is equal to the market value of the honey each hive produces. MB external MB Social $ Marginal Cost and Marginal Benefit Quantity (hives) MCprivate MB private 1 $200 $350 2 275 350 350 350 4 425 350 5 500 350 Instructions: Enter your answers as a whole number. a. What is "private quantity" of hives for Amanda to tend? hive(s) Now suppose that each of Amanda's bee hives also provides pollination services to surrounding farms and that these services are worth $75 per hive per month. b. Fill in the external marginal benefit (MBexternal and the social marginal benefit (MB social columns in the table above. c. What is the socially efficient number of hives for Amanda to tend if all costs and benefits are considered?
Expert Solution
Answer
A. Private quantity= 3 hives
Reason- MC private= MB private at Q=3
b.
| Quantity | MB external | MB social |
| 1 | 75 | 350+75=425 |
| 2 | 75 | 425 |
| 3 | 75 | 425 |
| 4 | 75 | 425 |
| 5 | 75 | 425 |
c. Socially efficient quantity of hives=4 hives.
Reason- MB social= MC private
At Q=4.
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