orchard owner pays nothing for this service.however,because the bees come to the orchard without his having to do anything.Because there are not enough bees to pollinate the entire orchard,the orchard owner must complete the pollination by artificial means,at a cost ofS10 per acre of trees. Beekeeping has a marginal cost of MC =10+5Q,where Q is the number of beehives.Each hive yields $40 worth of honey. a.How many bechives will the beekeeper maintain? The beekeepe nizes profits,when With a constant marginal revenu has any market power)and a marginal cost of 10+50: 40=10+50,or9=6. b.Is this the economically efficient number of hives? If there are too few bees to pollinate the orchard,the farmer must pay $10 per acre for artificial pollination.Thus,the farmer would be willing to pay up to $10 to the beekeep er to maintain each additional hive.So,the ginal so benefit,MSB,of each additional hive isS50.which is greater than the margina private benefit of $40.Assuming that the private marginal cost is equal tothe social marginal cost,we set MSB =MC to determine the efficient number of hives 50=10+50,orQ=8. Therefore,the beekeeper's private choice of =6 is not the socially efficient number of hives c.What changes would lead to the more efficient operation? The most adical change that be the merger of the farmer's business with the beekeeper's business.This merger would internalize the positive extemality of bee pollination.Short ofa merger.the farmer and beekeeper should enter into a contract for pollination services orchard owner pays nothing for this service, however, because the bees come to the orchard without his having to do anything. Because there are not enough bees to pollinate the entire orchard, the orchard owner must complete the pollination by artificial means, at a cost of $10 per acre of trees. Beekeeping has a marginal cost of MC = 10 + 5Q, where Q is the number of beehives. Each hive yields $40 worth of honey. a. How many beehives will the beekeeper maintain? The beekeeper maintains the number of hives that maximizes profits, when marginal revenue is equal to marginal cost. With a constant marginal revenue of $40 (there is no information that would lead us to believe that the beekeeper has any market power) and a marginal cost of 10 + 5Q: 40 = 10 + 5Q, or Q = 6. b. Is this the economically efficient number of hives? If there are too few bees to pollinate the orchard, the farmer must pay $10 per acre for artificial pollination. Thus, the farmer would be willing to pay up to $10 to the beekeeper to maintain each additional hive. So, the marginal social benefit, MSB, of each additional hive is $50, which is greater than the marginal private benefit of $40. Assuming that the private marginal cost is equal to the social marginal cost, we set MSB = MC to determine the efficient number of hives: 50 = 10 + 5Q, or Q = 8. Therefore, the beekeeper’s private choice of Q = 6 is not the socially efficient number of hives. c. What changes would lead to the more efficient operation? The most radical change that would lead to more efficient operations would be the merger of the farmer’s business with the beekeeper’s business. This merger would internalize the positive externality of bee pollination. Short of a merger, the farmer and beekeeper should enter into a contract for pollination services