Mike refuses because he doesn't want to get involved in drugs. He wanted to have real fun and not artificial fun. He decides he doesn't want to get involved with those kinds of people. Plus he didn't want to hurt Liz since he could get stoned or high and do something that could hurt him. So he takes Liz a few feet away from those guys. That's when Liz gets offered a cigarette by some girls next to her.
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