Kenneth J Arrow | Social Responsibility and Economic Efficiency

question 39

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.
-___________ of the social responsibility of firms, according to Arrow, provides assurance that competing firms will also accept the same responsibility.

• A) Privatization
• B) Interpretation
• C) Institutionalization
• D) Internalization

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Definitions:

Simple Rate

Simple rate often refers to the straightforward, non-compounded percentage in various financial calculations, such as interest rates.

Salvage Value

The anticipated market price of an asset at the conclusion of its effective life.

Operating Costs

Expenses associated with the day-to-day functions of a business, excluding costs related to the production of goods.

Useful Life

The estimated time period that an asset is expected to be operational and economically useful to the owner.