Suppose that Charles wants to dine at a fancy restaurant, but the only available table is in the smoking section. Charles dislikes the smell of cigarette smoke. He notices that only one person, Sam, is smoking in the smoking section. Charles values the absence of smoke at $40 . Sam values the ability to smoke in the restaurant at $15 . Which of the following represents an efficient solution in
the absence of transaction costs?
a. Sam continues to smoke because he has a right to smoke in the smoking section.
b. Charles offers Sam between $15 and $40 not to smoke. Sam accepts, and both parties are better off.
c. Charles offers Sam between $15 and $40 not to smoke. Sam declines because he has a right to smoke in the smoking section.
d. Only a government policy banning smoking in restaurants will solve this problem.
b
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To maximize her utility, Pat should spend all of her money and buy goods in a way that
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In response to accounting scandals in 2002, the federal government passed legislation requiring that corporate directors have a certain level of expertise with financial information and mandating that chief executive officers personally certify the
accuracy of financial statements. What is the name of this legislation? A) the 24th amendment to the Constitution B) the Sarbanes-Oxley Act C) the Kennedy-Lott Act D) the Accountant Reliability Act