Question

Scientists reported findings that blueberry flowers provide an excellent source of nectar to the beekeepers which will help them produce more honey.

(a) Using an appropriate diagram, show the perfectly competitive equilibrium in the 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.

(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.

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

Answer 1