Suppose a large tree on Jack's property blocks Amy's view of the ocean. Jack accepts Amy's offer of $2,000 to cut down the tree. This is an example of

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Quizplus · Accepted Answer

This is an example of internalizing externalities via voluntary agreements. Jack is incentivized to cut down the tree because he will receive payment from Amy for doing so, and Amy benefits from having an unobstructed view of the ocean. By entering into this voluntary agreement, the negative externality (the blocked view) is internalized and the parties involved can come to a mutually beneficial solution.

Suppose a Large Tree on Jack's Property Blocks Amy's View