Positive and negative externalities can lead to inefficiencies in the market. A negative externality occurs when non-consenting third parties bear the external cost. For example, let's say that a firm is producing paper at a factory and through the production process, the firm is polluting the local waterways. The negative externality, or external cost, from production is the water pollution. The market inefficiency occurs because the firm is producing more than society wants (the pollution) which results in an external cost. To alleviate the market inefficiency, the government may step in to tax or regulate the firm to reduce the external cost that is effecting non-consenting third parties. A positive externality occurs when non-consenting third parties receive an external benefit. For example, vaccinations help reduce the spread of disease which helps to keep populations healthy. The more individuals that are vaccinated the more it benefits society and non-consenting third parties. The inefficiency occurs when there are fewer vaccinations than would be optimal for society. A solution to this market inefficiency could be to provide an incentive to increase vaccinations which may be done through issuing subsidies.