!Important!
first is regulation
second is market based
negative prod externality
gov reg - limit output, shifts S back by the ext cost to MSC
taxes - tax shifts S back to MSC, internalises the costs
negative consumption externality
gov reg - prevent consumer activities such as smoking, move MPB back to MSB
indirect tax - shifts S back size of ext. cost, from there its a normal tax diagram
positive prod externality
direct government provision - comes out of gov funds, shifts S from MPC to MSC (spillover benefit)
subsidy = spillover benefit
positive consumption externality
legislation/advertising increases demand from MPB to MSB
subsidy or direct provision - both move S down, moving D too