Kenneth J Arrow | Social Responsibility and Economic Efficiency

question 121

Multiple Choice

Kenneth J. Arrow | Social Responsibility and Economic Efficiency
Arrow first reveals the shortcomings in arguments against the social responsibility of firms, or in arguments for profit maximization, setting the stage for why firms should be held responsible to society. In particular, corporations should be held responsible for the harms they cause, such as pollution and traffic congestion, for which they do not pay any costs. Lastly, regulations for such social obligations should be embodied in institutional, legal, or ethical manner, so all firms will accept that their competitors will also be held liable for their fulfillment.
-With respect to ___________, profit maximization arguments break down because companies do not pay the cost of the harm it imposes on others.

• A) altruism.
• B) pollution.
• C) traffic congestion
• D) both b and c

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Definitions:

Diamonds

Precious stones consisting of a clear and typically colorless crystalline form of pure carbon, notable for their brilliance and hardness.

Consumption Possibilities Frontier

A curve depicting the maximum amount of two or more goods or services that an economy can consume given its resources and technology.

Specialization

The practice of focusing on a limited scope of activities, goods, or services to gain a comparative advantage in production or service delivery.

Exchange

The act of giving one thing and receiving another in return, particularly in terms of goods, services, or other valuables in a market setting.