Burning carbon-based fuels produces a negative externality in the form of pollution. Therefore, without any government intervention, the market ____________. To correct for this market failure, government could ________________.

underproduces goods/services that use carbon-based fuels, tax the purchase of carbon-based fuels.

overproduces goods/services that use carbon-based fuels, tax the purchase of carbon-based fuels

overproduces goods/services that use carbon-based fuels, subsidize the purchase of carbon-based fuels.