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Final

EXAM PRACTICE QUESTIONS 16

2 Pages
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Department
Economics
Course Code
ECO200Y5
Professor
Robert Barber

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TUTORIAL 17WENESDAYAUGUST 13 2014 4PM5PMQUESTION 165pp 598599 As an illustration of the applebee externality suppose that a beekeeper is located next to a 20acre apple orchard Each hive of bees is capable of pollinatingacre of apple trees thereby raising the value of apple output by 25 a Suppose the market value of the honey from one hive is 10 and that the beekeepers marginal costs are given by MC3005Q where Q is the number of hives employed In the absence of any bargaining how many hives will the beekeeper have and what portion of the apple orchard will be pollinatedb What is the maximum amount per hive the orchard owner would pay as a subsidy to the beekeeper to prompt him or her to install extra hives Will the owner have to pay this much to prompt the beekeeper to use enough hives to pollinate the entire orchardQUESTIO
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