Externalities and the Oil Industry: A Hilarious Yet Insightful Look at Market Distortions In this comedy skit, “Senator Collins” attempts to explain the disastrous consequences of an oil spill and the externalities associated with it.

https://youtu.be/3m5qxZm_JqM. Clarke and Dawe – The Front Fell off.. Chapter 10 details how externalities distort market outcomes. In this comedy skit, “Senator Collins” attempts to describe an oil spill disaster and the resulting 20,000 tons of crude that spilled into the ocean (This is a fictitious event and would certainly be a disaster if real). The term externalities refers to all costs or benefits of a market activity borne by a third party, that is, by someone other than the immediate producer or consumer. In production, these externalities may occur when a power plant burns high-sulfur coal or an oil tanker spills thousands of tons of oil and therefore damages the surrounding environment. The damage inflicted on the neighboring people, vegetation, and ecosystem is external to the cost calculations of the firm and are not reflected in the price of the products created by the firms. The behaviors of profit maximizers are guided by comparisons of revenues and costs, not by philanthropy, aesthetic concerns, or the welfare of fish. What might be an example of an external cost associated with the oil production (including oil transportation) described in the YouTube mock interview? If a firm’s price of its product did, in fact, include all external costs, how would this change production. Please view the following video and submit an original (in your own words) synopsis/commentary of what you viewed. Submissions should be minimum 150 words. Be sure to include at least one specific principle from this week’s chapter coverage as you see it illustrated in the video. (You don’t have to reference a principle from each chapter-just tie the video concepts back to something you recognize from the text/PowerPoint content for the week).