Arrange the following steps in the process of identifying and addressing a market failure due to externalities:

To identify and address a market failure caused by externalities, we first need to recognize that an externality is a cost or benefit that affects someone who did not choose to be involved in a transaction. For example, if a factory pollutes a river, the people living nearby suffer from the pollution even though they are not part of the factory's business. Next, we analyze the situation to understand the extent of the externality and its impact on society. After this, we can consider solutions, such as government regulations or taxes, to encourage the factory to reduce pollution. Finally, we implement these solutions and monitor their effectiveness to ensure that the market operates more efficiently and fairly for everyone.