Which of the following scenarios best illustrates the concept of deadweight loss due to externalities in a market, and what potential solution could improve economic efficiency?

Deadweight loss occurs when the total economic welfare is not maximized, often due to externalities, which are costs or benefits that affect third parties not involved in a transaction. For example, if a factory pollutes a river while producing goods, the people living nearby suffer health issues and loss of clean water, which are not reflected in the factory's costs. This leads to overproduction of goods because the factory does not pay for the negative effects it causes, resulting in a deadweight loss to society. A potential solution to improve economic efficiency is to impose a tax on the factory that reflects the cost of the pollution, encouraging the factory to reduce its output or invest in cleaner technology. This way, the price of the goods would better reflect their true cost to society, helping to eliminate the deadweight loss.