Why is the market for honey efficient despite the potential problem of pollination externalities?
A) The government offers a Pigouvian subsidy for the production of honey.
B) The government imposes a Pigouvian tax on the production of honey.
C) The quantity of honey that can be produced each year is capped.
D) Beekeepers are paid for the pollination services their bees provide, thus internalizing the externality.

Question

Quizplus · Accepted Answer

Beekeepers are paid for the pollination services their bees provide, which means that they are internalizing the externality. This creates an incentive for beekeepers to maintain a healthy bee population and ensure that they are providing adequate pollination services, resulting in an efficient market for honey. A Pigouvian subsidy or tax would only come into play if there were negative externalities associated with the production or consumption of honey, which is not the case here. Capping production would limit the supply of honey, potentially leading to inefficiencies such as shortages or artificially high prices.

Why Is the Market for Honey Efficient Despite the Potential