The government could impose regulations or taxes to internalize the external costs of production, making the monopolist consider the full social cost in their decision-making.

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The government could impose regulations or taxes to internalize the external costs of production, making the monopolist consider the full social cost in their decision-making. For instance, a Pigovian tax on each unit of output equal to the external cost would align private incentives with social efficiency. Alternatively, the government could set a production quota at the socially efficient level to ensure the desired output is achieved. Explanation: The government can induce firms to produce the socially efficient level of output by implementing regulations or taxes to internalize external costs or by setting production quotas. This aligns private incentives with social goals