Question 1
The correct answer is: "I and IV".
When industrialization appears so do the negatives externatialities which are connected to this kind of manufacturing processes. An industrial economy usally requires mining and deforestation activities to obtain energy sources which will increase erosion in the soils affected. Moreover, due to the fumes from the industry the quality of the ir will be decreased.
Question 2
The correct answer is: "II and IV"
In order to reduce negative externalities in production, many times it is necessary that goverments step in because if not, companies do not have incentives to do it because adopting measures in this line would decrease their profits.
Therefore, the goverment might decide to restrict emissions by imposing a fine on those companies that exceed the preestablished limit, or by banning the dumping of toxic materials in order to protect water quality, and by imposing sanctions to defectors too.