One way to achieve efficiency in a market with a negative externality is

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In a market with a negative externality, the market supply curve underproduces goods as it only takes into account the private costs of production while ignoring the social costs. To achieve efficiency, the market supply curve needs to be raised to the position of the marginal social cost curve, which includes the costs incurred by society due to the negative externality. Therefore, option E is the correct answer. Option A is incorrect as it implies lowering the marginal social cost curve instead of raising the market supply curve. Option B is not always feasible or practical, especially when transaction costs are high. Option C is the opposite of what is required for efficiency. Option D is not applicable as side payments may be necessary to internalize the negative externality.

One Way to Achieve Efficiency in a Market with a Negative