Graph 10-3 This graph reflects the market for kiwifruit, where pesticide used by kiwifruit orchardists also unintentionally kills honey bees.
-Refer to Graph 10-3.At the private market outcome, the equilibrium price of kiwifruit will be:
A)P₁
B)P₂
C)P₃
D)P₄

Question

Graph 10-3  This graph reflects the market for kiwifruit, where pesticide used by kiwifruit orchardists also unintentionally kills honey bees.
-Refer to Graph 10-3.At the private market outcome, the equilibrium price of kiwifruit will be:
A)P₁ 
B)P₂ 
C)P₃ 
D)P₄

Quizplus · Accepted Answer

At the private market outcome, the equilibrium price of kiwifruit is P₂. This is the price where the quantity demanded by consumers (Qd) equals the quantity supplied by producers (Qs) in the absence of any externalities. In this case, the market does not take into account the negative impact of pesticide use on honey bees, which is an externality. If the negative impact on bees were fully reflected in the price, the equilibrium price would be higher (at P₃ or P₄). However, since this is not the case, the best choice is P₂.

Graph 10-3 This Graph Reflects the Market for Kiwifruit