A beekeeper lives adjacent to an apple orchard. The orchard owner benefits from the bees because each hive pollinates about one acre of apple trees. The orchard owner pays nothing for this service, however, because the bees come to the orchard without his having to do anything. Because there are not enough bees to pollinate the entire orchard, the orchard owner must complete the pollination by artificial means, at a cost of $10 per acre of trees.
Beekeeping has a marginal cost MC = 10 + 5Q, where Q is the number of beehives. Each hive yields $40 worth of honey.
a. How many beehives will the beekeeper maintain?
b. Is this the economically efficient number of hives?
c. What changes would lead to a more efficient operation?