More efficient in limiting externalities to the level at which the marginal social benefit from an externality-producing activity is equal to marginal social cost are taxes or subsidies. This is shown in Figure 12-2. Which is an extension of Figure 12-1. In the left panel of Figure 12-2 , the dashed MPCa+1 curve is obtained when the government impose a tax of t =$3 per hour of evening woodworking on individual A. Since the MPCa+1 curve intersects the MPBa curve at point Es, individual A will be induced to work the socially optimal number of hours per evening (3 hours), so that the marginal social benefit (MSB which now coincides with MPBa) equals the marginal social cost (that is, MSC=MSCa+MSCb).