How can government intervention effectively address the inefficiencies caused by negative externalities?

Negative externalities happen when a person's actions have harmful effects on others, like pollution from a factory that affects the air quality for nearby residents. Government intervention can help fix this problem by creating rules or taxes that make the polluter pay for the damage they cause. For example, if a factory has to pay a tax for every ton of pollution it produces, it may choose to reduce its emissions to save money. This encourages companies to find cleaner ways to operate, which benefits everyone. By taking these steps, the government helps to balance the interests of businesses and the well-being of the community, leading to a healthier environment.