A factory emits pollution that affects nearby residents. Which response would best address this negative externality?

To address the negative externality of pollution from a factory, the best response is to impose regulations or taxes on the factory's emissions. This means that the factory would have to pay a fee for the amount of pollution it produces, which encourages them to reduce their harmful emissions. For example, if the factory has to pay a tax for every ton of pollution it emits, it might invest in cleaner technology to lower its costs. By making the factory accountable for its pollution, nearby residents can experience better air quality and improved health. This approach not only helps the community but also promotes a more sustainable way of doing business.