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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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