Well first let me say that I believe your option C is equitable and pretty much everyone finds it equitable. I'm also not talking about piracy or breaking DRM, I'm mostly talking about the philosophical implications.
So you're right that with a hard copy of a book you can only lend, sell, or give it out once (unless it is returned to you). The reason is there is only one physical copy. This has made sense with books and other media because the barrier to copy has traditionally been so high. Let's just delve into the example of a book and how it's copied and why lending makes sense.
So as an individual just a few hundred years ago you almost certainly did not have a printing press, though even if you did it would take you a lot of time to actually be able to copy a book. If you wanted to give someone a copy of a book (not lend them your copy) you would most likely copy it by hand with pen and paper. So lending makes sense and is far easier.
Now I believe in the 1800s the typewriter was invented. So about 100 years ago you still probably wouldn't have access to a printing press, but you might have access to a typewriter. Again, it would be a lot of work to retype the entire book to give it to a friend. It's easier and makes more sense just to lend your copy that you bought.
Now go to around the 1950s when the photocopier was invented. I realize there were rudimentary implementations of this far earlier, but as far as something usable by the general populace this was the turning point. At this point it's starting to become easier to copy information. It would still be tedious and time consuming, but the amount of effort has decreased thanks to technology. It would still make more sense to not waste your time and just lend the book though.
Now fast forward to around the time personal computers really started to take off, say around 1980 (was a bit before but I'm being approximate). Now an average person on the street might have access to a computer and a printer. You would still have to retype the whole book and print it off, and the typography wouldn't be great, but once again the ease of copying has been increased. Information is slowly ending it's coexistence with the physical world. By that I mean the actual data, the information, no longer needs to be on a piece of paper to read. However, at this stage you're probably not going to transfer digital copies and it would be easier to print them. Although, it's probably easier still just to lend a friend your copy of the physical book.
Now let's skip to today as you get the idea. Books are created on computers, and computers are nearly ubiquitous. Not only that but many computers are connected via the internet. The typography is easy to get down and you can easily write and distribute a digital copy of a book via a PDF file (perhaps form a LaTeX source file) and with a little more work you can send it to the printing press to get a physical book. Suddenly all of the work of copying the information has been reduced drastically. You don't have to copy the physical object anymore. You have the information without it being put into a physical form. Couple this with the falling technology prices and the ease of copying and it is suddenly too easy to resist sending a copy rather than lending your copy. Now that you have a digital copy and no hard copy, suddenly the idea of lending doesn't quite make sense. Making a copy is essentially free. The publishers have to actively combat this to make it work more like it used to.
Now again I'm not advocating piracy or taking a firm stance that information should be free. I'm merely looking at the trend and offering my opinion. I think the ease of disseminating information is tending towards zero, i.e. no effort. Gone are the days that in order to get a copy of a book easily you need a very expensive printing press and a good typesetter. Now, assuming this happened unhindered what will this look like in ten years? twenty?
As I said, I think your option C is completely fair. But let's consider the fact that option C works so well with physical books because the book itself has a finite number of copies printed and has traditionally been time consuming and difficult to copy. With the digital copy you just need to make one and thanks to technology copying is essentially free. So does option C actually make sense for a digital copy when it's the antithesis to what technology allows us to do?