2.Watch the following video and answer questions below: https://mru.org/courses/principles- economics-microeconomics/externalities-definition-pigovian- tax?utm_source=EX&utm_medium=MRU&utm_campaign=MRUEmail&utm_content=externali ties-definition-pigovian-tax

1.An externality occurs when

a.People consume a product outdoors

b. Trade occurs external to the market

c.Consumption or production of a product imposes a cost or benefit on a group other than consumers or producers

d.The price of one product influences demand for another product.

e. Government regulation impacts the market for a product

2. Which of the following is true about the social cost of a product with a negative externality?

a.Social Cost = External Cost - Private Cost

b.Social Cost = Private Cost + External Cost

c.Social Cost = Private Cost

d.Social Cost = Private Cost - External Cost

e.Social Cost = External Cost

3. If there is an external cost associated with the production of a good, the markets will under-estimate the ____________, and as a result the quantity produced will be _________ than the socially optimal quantity.

a.Cost; lower

b.Cost; higher

c.Benefit; lower

d.Benefit; higher