Alice Keeps a Bee Farm Next to an Apple Orchard

question 217

Multiple Choice

Alice keeps a bee farm next to an apple orchard. She chooses the optimal number of hives by selecting the honey output level that maximizes her profit. Alice's bees help to pollinate the blossoms in the apple orchard next to her, increasing the fruit yield. Thus

• A) the private market provides the socially desirable output of honey.
• B) too much honey is produced.
• C) the local government taxes honey production.
• D) too little honey is produced.

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Definitions:

Total Costs

The sum of all expenses incurred by a business in the production of goods or services, including fixed and variable costs.

Output

The amount of goods or services produced by a company, industry, or economy within a specified period.

VC

Venture Capital, a form of private equity financing provided by investors to startups and small businesses with long-term growth potential.

AVC

Average Variable Cost, which is the total variable costs (costs that change with production levels) divided by the quantity of output produced.