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Kunra is located in Boston and produces cars. In the course ofcar production, Kunra releases pollution as a negative externalityinto the atmosphere of Boston. Some of the pollution-relatedproblems include skin cancer, contamination of drinking water,breathing epidemics, birth defects, and offensive odor. Sadly,Kunra does not do anything to bear the costs associated with thehealth and ecological problems Boston residents suffer.Interestingly, Kunra believes that Boston residents do not knowabout the problems and then leaves Boston residents to pay for thehealth and ecological problems they suffer from the pollutiongenerated in the production of cars. What a rip-off against Bostonresidents!!! Kunra smiles home with huge profits. Kunra’s customersoutside Boston feel satisfied with Kunra’s cars and organize eventsto praise the incredible quality of Kunra’s cars. Alas, Bostonresidents apparently turn out to be victims in the process ofproduction and consumption of Kunra’s cars.

Suppose that you are a public administrator in Boston’s CityGovernment, have trained in Economics for Public Administratorsfrom Clark Atlanta University, and are working with the followingmarginal benefits and costs for Kunra’s car production, where Q isthousands of cars and P is price per car:

MPB (Marginal Private Benefit) = 120- 0.6Q (benefits to individualconsumers of Kunra’s cars).

MPC (Marginal Private Cost) = 20 + 0.4Q (costs of producing cars byKunra).

MEB (Marginal External Benefit) = 0 (an external benefit is apositive externality: car production benefits to Boston may includea healthy environment and healthy residents in Boston. In thecurrent context, external benefits are zero).

MEC (Marginal External Cost) = 0.25Q (an external cost is anegative externality: health and ecological problems associatedwith the pollution generated by Kunra that affect Boston’sresidents and environment).

Find the competitive equilibrium, Qc and Pc; the efficientequilibrium, Qe and Pe; and show the competitive equilibrium andthe efficient equilibrium in the same graph that is properlylabeled.