In the presence of external costs, like the cost of pollution, the marginal social cost = marginal private cost + marginal external cost. The output produced by the unregulated competitive market is a. where marginal private cost = marginal benefit and, therefore, the output is efficient. b. where marginal social cost = marginal benefit and, therefore, the output is efficient.. c. inefficient, and a pigovian tax equal to the marginal external cost, would induce firms to produce the efficient output where marginal social cost = marginal benefit. d. inefficient, and a pigovian tax equal to the marginal social benefit, would induce firms to produce the efficient output where marginal social cost = marginal benefit. e. greater than the efficient output and, therefore, a tax would lead to even greater welfare losses.