Bob's Bee Emporium makes organic honey, which Bob sells at farmers' markets. The value of his Bee Emporium in its current location is $100,000. Unfortunately, Bob's bee's frequently fly to the neighboring property, Daisy's Daycare Center, and stingthe small children, some of whom have allergic reaction to the bee stings. Daisy's Daycare Center business is worth $100,000, before the cost of treating any of the children, which the Daycare Center has to pay. The cost of treating the children for thebee stings is $15.000.Relocating the Bee Emporium would reduce its value by $25,000. Relocating the Daycare Center would cost $10,000. The table below shows the value of the businesses under the above conditions.Daisy's Daycare CenterPresent LocationRelocateBob's Bee EmporiumPresent Location$85,000$90.000$100,000$100,000Relocate$100,000$90.000S75.000$75.000Which situation is economically efficient?O Daycare remains in present location, bee farm relocatesO Daycare remains in present location, bee farm remains in present locationO Daycare relocates, bee farm remains in present locationDaycare relocates, bee farm relocates

Answered: Bob's Bee Emporium makes organic honey,…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Bob's Bee Emporium makes organic honey, which Bob sells at farmers' markets. The value of his Bee Emporium in its current location is $100,000. Unfortunately, Bob's bee's frequently fly to the neighboring property, Daisy's Daycare Center, and sting
the small children, some of whom have allergic reaction to the bee stings. Daisy's Daycare Center business is worth $100,000, before the cost of treating any of the children, which the Daycare Center has to pay. The cost of treating the children for the
bee stings is $15.000.
Relocating the Bee Emporium would reduce its value by $25,000. Relocating the Daycare Center would cost $10,000. The table below shows the value of the businesses under the above conditions.
Daisy's Daycare Center
Present Location
Relocate
Bob's Bee Emporium
Present Location
$85,000
$90.000
$100,000
$100,000
Relocate
$100,000
$90.000
S75.000
$75.000
Which situation is economically efficient?
O Daycare remains in present location, bee farm relocates
O Daycare remains in present location, bee farm remains in present location
O Daycare relocates, bee farm remains in present location
Daycare relocates, bee farm relocates

Expert Solution

Step 1

For the above example provided let us use the Pareto criterion for judging economically efficient alternative . Pareto efficient alternatives are referred to those deviating from no person can be made better off without making someone worse-off .

Let us check all four scenarios one by one to check the efficiency .

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