1.Circle the correct answers. Suppose there is a perfectly competitive market with negative externalities, then:

a.The competitive equilibrium will maximize social surplus.

b.The competitive equilibrium will not maximize social surplus.

c.In the competitive equilibrium we will produce too much relative to the surplus maximizing quantity.

d.In the competitive equilibrium we will produce too little relative to the surplus maximizing quantity.

e.None of the above.

2.Circle the correct answers. Suppose there is a perfectly competitive market with positive externalities, then:

a.The competitive equilibrium will maximize social surplus.

b.The competitive equilibrium will not maximize social surplus.

c.In the competitive equilibrium we will produce too much relative to the surplus maximizing quantity.

d.In the competitive equilibrium we will produce too little relative to the surplus maximizing quantity.

e.None of the above.