Suppose that Maria wants to dine at a fancy restaurant,but the only available table is in the smoking section.Maria dislikes the smell of cigarette smoke.She notices that only one person,John,is smoking in the smoking section.Maria values the absence of smoke at $25.John values the ability to smoke in the restaurant at $15.Which of the following represents an efficient solution in the absence of transaction costs?

Question

Quizplus · Accepted Answer

This represents a bargaining solution where Maria offers compensation to John in exchange for the absence of smoke. This solution is efficient because both parties gain from the transaction: Maria gains the absence of smoke valued at $25, and John gains the ability to smoke in the restaurant valued at $15 plus the compensation offered by Maria. Therefore, both parties are better off by reaching a voluntary agreement instead of relying on their respective rights. Option A is not efficient because it doesn't address Maria's dislike for smoke. Option C is not efficient because it shows an unwillingness to bargain. Option D is not efficient because it relies on the use of force instead of voluntary exchange.

Suppose That Maria Wants to Dine at a Fancy Restaurant,but