Trade between countries that is without restrictions is called

Jon runs a bar in New York City. A city law prevents smoking in New York bars, but Jon is able to convince a friend in city hall to grant his bar a smoking permit by exploiting some fancy loopholes in the law

While smoking enables Jon to charge a premium to the customers (higher drink prices), his workers are subject to second-hand smoke. Therefore Jon has to pay his workers a wage higher than he otherwise would. Assuming Jon's production function is f(L,K) = L?K1-?, where L is the quantity of workers and K is the quantity of capital, how does Jon's optimal capital-to-labor ratio compare to similar bars without smoking?

If an estimated regression explains none of the variation, R2 will be

A) 0. B) between 0 and 1. C) 1. D) unable to determine with the information given.