How does government intervention aim to correct negative externalities like pollution in a market economy?

Government intervention aims to correct negative externalities, like pollution, by implementing rules and regulations that help reduce harmful effects on society. For example, when a factory emits smoke that pollutes the air, it can harm people's health and the environment, which are costs not reflected in the factory's production costs. To address this, the government might impose taxes on the factory for each unit of pollution it produces or set strict limits on emissions. This encourages the factory to find cleaner methods of production to avoid penalties. By doing so, the government helps ensure that the costs of pollution are considered, leading to a healthier community and a more efficient market overall.