3. Consider the market for honey. Numerous studies indicate that Apiculture (honeybee cultivation) can improve agricultural...
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3. Consider the market for honey. Numerous studies indicate that Apiculture (honeybee cultivation) can improve agricultural production by pollinating crops, thereby increasing pollinator-dependent crop yields. (a) The production of honey has an impact on society. Is this a positive or a negative externality? Why? Is it a production or a consumption externality? Explain why. (1 pt.) (b) Use a demand-supply diagram to illustrate the honey market. Show the demand and supply curves and label them appropriately using the terms as discussed in module 1. Show the market equilibrium - label the market equilibrium quantity Qm and the market equilibrium price Pm. Use the concept of externalities to argue that the market will not provide the socially desirable quantity of honey (Qsd or Qefficient). Use your supply and demand graph to compare the free market and the socially desirable quantities of honey (i.e., which one is greater?). Explain your answer. (2 pts.) (c) What kind of government policies could be used to improve upon the market outcome in 3(b)? Briefly discuss two possible policies. (1 pt.) 3. Consider the market for honey. Numerous studies indicate that Apiculture (honeybee cultivation) can improve agricultural production by pollinating crops, thereby increasing pollinator-dependent crop yields. (a) The production of honey has an impact on society. Is this a positive or a negative externality? Why? Is it a production or a consumption externality? Explain why. (1 pt.) (b) Use a demand-supply diagram to illustrate the honey market. Show the demand and supply curves and label them appropriately using the terms as discussed in module 1. Show the market equilibrium - label the market equilibrium quantity Qm and the market equilibrium price Pm. Use the concept of externalities to argue that the market will not provide the socially desirable quantity of honey (Qsd or Qefficient). Use your supply and demand graph to compare the free market and the socially desirable quantities of honey (i.e., which one is greater?). Explain your answer. (2 pts.) (c) What kind of government policies could be used to improve upon the market outcome in 3(b)? Briefly discuss two possible policies. (1 pt.)
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