Question - Amanda keeps bees to produce honey. Each hive produces $300 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.
|
Marginal Cost and Marginal Benefit
|
|
Quantity (hives)
|
MCprivate
|
MBprivate
|
MBexternal
|
MBsocial
|
|
1
|
$100
|
$300
|
|
|
|
2
|
200
|
300
|
|
|
|
3
|
300
|
300
|
|
|
|
4
|
400
|
300
|
|
|
|
5
|
500
|
300
|
|
|
a. What is the optimal amount of hives for Amanda to tend?
b. Each of Amanda's bee hives also provides pollination services to surrounding farms that are worth $100 per hive per month. Fill in the external marginal benefit (MBexternal) and the social marginal benefit (MBsocial) 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?