Betty and Anna work at the same office in Calgary.They both must attend a meeting in Edmonton,and they have decided to drive to the meeting together.Betty is a cigarette smoker and her marginal benefit from smoking one package of cigarettes a day is $40.Cigarettes are $6 a pack.Anna dislikes cigarette smoke and her marginal benefit from a smoke-free environment is $50 a day.If Betty drives her car with Anna as a passenger,________.If Anna drives her car with Betty as a passenger,________.
A)Anna will offer Betty an amount between $34 and $50 and Betty will not smoke;Betty does not smoke because Betty will not offer Anna a high enough price to be allowed to smoke.
B)Betty will smoke because she owns the property rights in the car;Betty does not smoke because Betty will not offer Anna a high enough price to be allowed to smoke.
C)Betty will smoke because she owns the property rights in the car;Betty will offer Anna $51 and Betty will smoke.
D)Anna will offer Betty an amount between $34 and $50 and Betty will not smoke;Betty will offer Anna $51 and Betty will smoke.
E)Betty will smoke because she is the car owner;Betty will offer Anna an amount between $34 and $50 and Betty will smoke.

Question

Quizplus · Accepted Answer

If Betty drives, Anna will offer her an amount between $34 (the difference between Anna's benefit and the cost of cigarettes) and $50 (Anna's benefit from a smoke-free environment) to not smoke. If Anna drives, Betty will not smoke because she won't offer Anna a high enough price to compensate for Anna's higher benefit from a smoke-free environment.

Betty and Anna Work at the Same Office in Calgary