The U.S. small motor boat industry is clustered in California. The boats are sold in the competitive world market, at a world price of $5,000 per boat. The annual supply curve for Californian suppliers is depicted below. A. The Californian production process results in fumes that have negative health effects on residents in its neighboring state of Nevada. Each boat contributes $2,000 to Nevada's annual public health costs. Depict this situation on the graph. How many boats will be produced in California? Explain whether this market outcome is efficient.

1. The US. small motor boat industry is clustered in California. The boats are sold in the competitive world market, at a world price of $5,000 per boat. The annual supply curve for Californian suppliers is depicted below. 5 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 A. The Californian production process results in fumes that have negative health effects on residents in its neighboring state of Nevada. Each boat contributes $2,000 to Nevada's annual public health costs. Depict this situation on the graph. How many boats will be produced in California? Explain whether this market outcome is efcient. B. Nevada health advocates have proposed national legislation to prohibit Californian production of boats. Would this improve economic efciency? Explain. C. Alternatively, if representatives from California and Nevada can negotiate in private, would you expect Nevada to continue to push for the national legislation to be adopted? Explain