How do corrective taxes impact the market equilibrium when private costs do not reflect societal costs in the presence of negative externalities?

Corrective taxes are designed to address situations where the costs of a product or activity negatively affect society, known as negative externalities. When private costs, like production expenses, do not include these societal costs, the market equilibrium can lead to overproduction and harm, such as pollution. By imposing a corrective tax, the government raises the cost of producing harmful goods, making companies more likely to reduce their output. For example, if a factory produces a lot of pollution, a tax on each unit produced can encourage the factory to find cleaner methods or produce less, aligning private costs with the true societal costs. This shift helps to restore equilibrium by reducing the quantity produced to a level that is more socially acceptable, benefiting everyone.