Let's create a somewhat more complicated situation. The market for beeswax candles is shown in the following table:
Suppose the community derives a positive externality of $10 per box. The bees pollinate the flowers, which adds value to the community's appearance. But at the same time, they are a menace to the community because they are voracious stingers. The negative externality is estimated to be $10 per box. What is the extent of market failure in this situation? What price and quantity does the market generate, and what price and quantity should it generate to achieve an efficient use of resources? How can this out come be obtained?

  • CreatedApril 21, 2015
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