Arrange the following steps in the correct order to understand how externalities affect economic decisions: A) Government intervenes with taxes or subsidies, B) Externalities impact third parties, C) Individuals and businesses make decisions based on personal costs and benefits, D) The market fails to allocate resources efficiently.

To understand how externalities affect economic decisions, we start with individuals and businesses making decisions based on their personal costs and benefits. However, when externalities occur, they impact third parties who are not directly involved in the transaction. This leads to a situation where the market fails to allocate resources efficiently because the true costs or benefits are not reflected in the prices. To correct this failure, the government may intervene with taxes or subsidies to encourage or discourage certain behaviors. For example, if a factory pollutes a river, it affects nearby residents, prompting the government to tax the factory to reduce pollution and protect the community.