"Residents of a territory should be allowed to decide whether or not to permit slavery" is the correct option.
Explanation:
Popular sovereignty was called Squatter Sovereignty in New England. It was a controversial political doctrine that allowed the federal territories to decide themselves if they want to enter the Union as Free state or Slave states. It was first used in 1850 while organizing Utah and New Mexico. Its first major implication was seen with the passage of Stephen A. Douglas's Kansas-Nebraska Act in 1854, it repealed the prohibition of slavery north of the 36 Degree 30 minutes.
