How can a government effectively address the negative externalities associated with pollution in a market equilibrium by using subsidies?

A government can effectively address pollution, which is a negative externality, by using subsidies to encourage cleaner practices. When a company pollutes, it often does not pay for the harm it causes to the environment and public health. By providing subsidies to businesses that use eco-friendly technologies or practices, the government makes it cheaper for them to operate without polluting. For example, if a factory receives money to install cleaner machinery, it can reduce its emissions and help the environment while still being profitable. This way, the government helps shift the market equilibrium towards a healthier outcome for society and the planet.