How do taxes work to reduce a negative externality? Explain in detail

What will be an ideal response?

If a per-unit tax exactly equal to marginal damage costs is imposed on a firm, the firm will weigh the tax, and thus the damage costs, in its decisions. At the new equilibrium price consumers will be paying an amount sufficient to cover full resource costs as well as the cost of damage imposed. The efficient level of output for the firm will also fall as well.