Which of the following scenarios best illustrates the need for government intervention due to negative externalities in a market?

A negative externality occurs when a third party suffers from the actions of others, leading to a market failure. For example, imagine a factory that produces goods but also releases harmful smoke into the air. The people living nearby breathe this polluted air and may get sick, even though they are not involved in the factory's business. In this case, the factory's operations harm the community, which shows the need for the government to step in and regulate the factory to reduce pollution. By implementing rules or taxes, the government can help protect the health of the community and ensure that the factory considers the wider impact of its actions.