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Question: 4 all the residents of hazzard county love to make...

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4. All the residents of Hazzard County love to make fresh apple pies. They all love apple pies so much that they all have their own apple trees. Up the road a piece, Uncle Jesse and Daisy keep bees for producing honey (its really just a front business through which they funnel all of Bo and Lukes black market moonshine profits). Assume the Hazzard County honey market is perfectly competitive. The local bees buzz around all over the Hazzard County and pollinate all the apple trees, providing a crucial service to county residents. Assume that without the bees, no ones trees would get pollinated and no one would be able to grow apples and make fresh apple pies. a. Using a simple supply and demand diagram of the Hazzard County honey market, model the positive externality associated with honey production. Be sure to show both the competitive equilibrium and the socially optimal equilibrium honey output and price. b. Using your diagram, show the total economic welfare that would be obtained if the market produced the competitively optimal amount of honey versus the socially optimal amount of honey. What is the increase in social welfare that would result from moving from the competitive equilibrium to the socially optimal equilibrium? c. How might Boss Hoggs economic advisor construct a basic market intervention policy that would induce the local beekeepers to produce the socially optimal amount of honey? Mathematically demonstrate your answer.

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