What is an externality? An externality is a benefit given to the people with or without a cost. Why does the goverment regulate certain externalities? The government does this to help prevent health issues, global issues, and decrease the chance of spending money to fix these issues. An example of how this holds true with positive externalities is the example of the flu shot. The flu shot is usually covered by all insurances and is usually free to the patient but if people ignore this benefit they are more likely to get and spread the flu causing health probllems throughout the area. An example of why the government regulates negative externalities is because if a negative externality suffers damage its more costly to the government. An example is the nuclear power plant in Shippingport, PA. If something were to ever happen to the power plant it would cause the government massive ammounts of money on controlling the radiation, curing the people exposed, fixing the plant and its sources, and lastly sorting out the person(s) responsible. So for these reasons the government regulates certain externalities to prevent health issues, global issues, and decrease the chance of spending money to fix these issues.