Question

Question 2
The Australian Blueberry Growers’ Association recently reported findings that blueberry flowers
provide a good source of nectar to the beekeepers to help produce more honey.

(a) Using an appropriate diagram, show the perfectly competitive equilibrium in the Australian
blueberry market. Also show the quantity of blueberries that would maximise social surplus.
Is this equal to the market equilibrium quantity? Fully explain your answer. [4 marks]

(b) Why would deadweight loss occur in this market? Identify the area for deadweight loss in
your diagram, and explain how you derived your answer. [3 marks]

(c) Discuss how the government could help to ‘internalise’ the externality using a market-based
policy. [3 marks]

Note: Use only ONE diagram to illustrate your answers for parts (a), (b), and (c).

Answer 1