A new factory is built near a residential area, resulting in increased air pollution that affects the health of local residents. Which of the following actions would best address the negative externality created by the factory?

To address the negative externality created by the factory's air pollution, the best action would be to implement strict regulations on emissions. This means the factory would have to limit the amount of harmful substances it releases into the air. For example, if the factory is required to install better filters or switch to cleaner technologies, it can reduce pollution significantly, improving the health of nearby residents. Additionally, the factory could be taxed on its emissions, encouraging it to find ways to lower pollution levels. By taking these steps, we help protect the community's health while still allowing the factory to operate.