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This is production externalities, because a factory is in a city where a lot of people live and it effects them by causing pollution.
People are complaining because of the horrible smells and noise pollution the factory is creating.
It is adding to the already pollutant air and therefore it is creating global warming.
The air pollution is affecting animals because of an increase in carbon dioxide levels. This causes animals such as rabbits to die/get ill.
The government decides to tax companies on the amount of pollution they produce. For example, they will tax the factory because they are producing too much.
Due to the recent tax change, the factory has been producing less emissions so the surrounding area has become cleaner and more eco-friendly.
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