ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Bees and Crops This is an example of a positive externality: bee keepers take part in a market for honey; they raise and keep bees in order to harvest honey and sell it to the public. In the process of creating honey, bees fly around and pollinate plants, which enables them to grow.

Detailed explanation-2: -Externalities occur when a grower rents out a location from which bees can access to her neighbor’s nectar. Underinvestment in citrus trees can occur when the value of the trees’ nectar is captured from groves other than the ones operated by the growers that receives the fees.

Detailed explanation-3: -An apple grower’s orchard provides nectar to a neighbor’s bees, while the beekeeper’s bees help the apple grower by pollinating his apple blossoms.-benefits for the apple growers but not the beekeepers.

Detailed explanation-4: -This is because, with a positive externality, the output produced in the market is less than the socially efficient quantity.