Suppose That Charles Wants to Dine at a Fancy Restaurant

question 65

Multiple Choice

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.

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Definitions:

Return on Marketing Investment

The profitability and efficiency of marketing efforts, measured by the revenue generated from marketing activities divided by the cost of those activities.

Mission Statement

A concise declaration of an organization's core purpose and focus that informs its strategies and decision-making.

Business Directive

A formal instruction or policy issued by a company's upper management outlining goals, strategies, or actions to be taken by the organization.

Customer Value

The perceived benefits, both monetary and nonmonetary, that a customer receives from a product compared with the cost of obtaining it.