Which of the Following Statements Concerning a Firm's Quest to Maximize

question 33

Multiple Choice

Which of the following statements concerning a firm's quest to maximize wealth is correct?

• A)In extremely competitive industries, we would expect firms would voluntarily engage in many socially beneficial projects to try to maximize their stocks' values.
• B)Actions that maximize a firm's stock price are inconsistent with maximizing social welfare.
• C)The concepts of social responsibility and ethical responsibility on the part of corporations are completely different and neither is relevant in maximizing stock price.
• D)In a competitive market, if a group of firms does not spend resources making social welfare improvements, but another group does, in general, this will not affect the second group's ability to attract funds.
• E)If government did not mandate socially responsible corporate actions, such as those relating to product safety and fair hiring practices, most firms in competitive markets probably would not pursue such policies voluntarily.

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Definitions:

Patents

Legal rights granted to inventors, allowing them exclusive use and exploitation of their inventions for a certain period.

Unrealized Intercompany Profits

Profits arising from transactions between entities within the same group that have not yet been realized by selling the goods or services to an external party.

Cumulative Dividends

Dividends on preferred shares that accumulate and must be paid out before any dividends can be distributed to common shareholders.

Consolidated Cost

The total cost that combines figures from various subsidiaries of a parent company into one aggregated total.