Suppose That a Smoker and a Non-Smoker Are Seated Next

question 47

Multiple Choice

Suppose that a smoker and a non-smoker are seated next to each other in a restaurant. This restaurant does not offer a non-smoking section. The smoker is indifferent between 1) smoking and 2) not smoking and consuming a $6 dessert. The non-smoker values being able to eat in a smoke-free environment at $10. According to the Coase Theorem, and assuming no bargaining costs, what will happen?

• A)The smoker will continue to smoke because that is his right.
• B)The smoker will stop smoking, just to be a nice guy.
• C)The non-smoker will offer to pay the smoker between $6 and $10 to stop smoking, but the smoker will refuse because he has the right to smoke.
• D)The non-smoker will offer to pay the smoker between $6 and $10 to stop smoking, and the smoker will accept the money and refrain from smoking.

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