Suppose that a chemical manufacturing plant is releasing nitrogen oxides into the air, and these emissions are associated with health and ecological damages. Economists have estimated the following marginal costs and benefits for the chemical market, where Q is monthly output in thousands of pounds and P is price per pound.

MSB = 50 – 0.4Q                            

MSC = 2 + 0.4Q

MEB = 0                                             

MEC = 0.2Q

a. Find the competitive equilibrium, Q_C and P_C, and the efficient equilibrium, Q_E and P_E. 

b. Find the dollar value of a product charge that would achieve an efficient solution.