Question

Offering to pay the passenger in front of you to keep her from reclining her airplane seat is an example of a Pigovian solution to an externality situation. command-and-control policy. a Coasian solution to an externality situation. a tradable exchange contract.

Answer 1

Answer:

a Coasian solution to an externality situation.

Explanation:

Basically. a Coasian solution to an externality situation occurs when the economic activities of one party results in a damage or cost to another party or their property. In this situation, the Coase Theorem which recommends two possible settlements may be applied. The first settlement is for the party causing the damage or imposing the cost to choose to give financial compensation to the affected party so that he can continue to impose the cost or cause the damage. The second settlement is for the affected party to pay the party causing the damage or imposing the cost so that he can stop causing the damage or imposing the cost.

From the question, the affected person chose the second possible settlement by offering to pay the passenger in front of him to keep her from reclining her airplane seat. It is therefore an example of a Coasian solution to an externality situation.