The diagram below illustrates a negative externality. S is the marginal private cost and S₁ is the marginal social cost. Using this diagram, demonstrate graphically and explain verbally how the government can use a tax incentive to eliminate the problem caused by the negative externality.

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The Answer of The diagram below illustrates a negative externality. S is the marginal private cost and S₁ is the marginal social cost. Using this diagram, demonstrate graphically and explain verbally how the government can use a tax incentive to eliminate the problem caused by the negative externality.

The Diagram Below Illustrates a Negative Externality