​Sophia Sits Behind Gabriel on an Airplane

question 25

Multiple Choice

​Sophia sits behind Gabriel on an airplane. Gabriel owns the right to recline his seat and values this right at $10. Sophia values a non-reclined seat in front of her at $40. Assuming no transaction costs, which of the following represents an efficient solution?

• A)​Sophia offers Gabriel between $10 and $40 to not recline his seat. Gabriel accepts, and both parties are better off.
• B)​Sophia offers Gabriel between $0 and $10 to not recline his seat. Gabriel accepts, and Sophia is better off.
• C)​Sophia offers Gabriel between $10 and $40 to not recline his seat. Gabriel declines because he has the right to recline his seat.
• D)​Gabriel offers Sophia between $10 and $40 to recline his seat. Sophia accepts, and both parties are better off.

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Definitions:

Tractor-Trailer

A vehicle comprising a towing engine (tractor) and a trailer, used primarily for transporting goods over long distances.

Spring Brake Relay Valve

A spring brake relay valve is a component in air brake systems that controls the application and release of the spring brakes, typically used in heavy-duty vehicles for parking and emergency brakes.

Control Signal

An electrical or electronic signal used to control the behavior of a system or device, directing its operation or response.

Trailer

Any of a number of different types of nonpowered, load-carrying vehicles towed by another vehicle.