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An apple grower’s orchard provides nectar to a neighbor’s bees, while the beekeeper’s bees

An apple grower’s orchard provides nectar to a neighbor’s bees, while the beekeeper’s bees

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. Use Figure 4.6b to explain why this situation of dual positive externalities might lead to an underallocation of resources to both apple growing and beekeeping. How might this underallocation get resolved via the means suggested by the Coase theorem?

7. The LoJack car recovery system allows the police to track stolen cars. As a result, they not only recover 90% of LoJack-equipped cars that are stolen but also arrest many auto thieves and shut down many “chop shops” that take apart stolen vehicles to get at their used parts. Thus, LoJack provides both private benefits and positive externalities. Should the government consider subsidizing LoJack purchases?

Abhinav 05-Dec-2019

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