In Singapore, littering fines are strictly enforced. This is an example of a policy that a. relies on the Coase Theorem. b. discriminates against foreigners. c. relies on moral codes to reduce the pollution externality. d. relies on incentives to reduce the pollution externality.

Option D        

Explanation:

In simple words, externality refers to the situation when an unrelated third party suffers certain consequences, whether positive or negative, due to any acts or decision of some other individual party or parties.

Thus, enforcing legal fines on littering will result into more clean roads and cities reducing population which will further result in less diseases and harm to the people living in the society. Thus, individuals will suffer less due to actions of others, that is, no negative externality.

d. relies on incentives to reduce the pollution externality.

Explanation:

Negative Externality is negative side effect on third party , without any compensation for the same. Pollution is a negative externality , as it has extra social cost (negative impact) on society.

Coase Theorum is internalising of externality cost , by bargaining between two parties. Moral codes to reduce pollution externality include creating social awareness & consciousness. Foreign Discrimination is completely unrelated. So, all these points are completely inapt.  

Singapore's case of imposing fine on littering : signifies incentive approach to reduce pollution externality. Such because : not littering creates a  self monetary incentive for the person - of saving the fine amount, which he / she could have lost if he / she could have littered.

#4 is the correct answer.