Question

Friedman claims that corporations are the wrong institutions to decide on or implement social policy. Which of the following is NOT one of his reasons for claiming this?

Select one:

A. Corporations operate on behalf of shareholders, who did not invest in social programs.

B. Corporations only influence the economy, not culture.

C. Corporations lack expertise in social policy.

D. Corporations are not directly accountable to society as a whole.

Why would the presence of an information imbalance in a business transaction undermine the profit argument (that is, the argument that profits reflect the value a firm creates for society).

Select one:

A. With imperfect information, one party cannot judge how much they value something, and thus their willingness to pay/accept won't reflect value.

B. Revenue gained due to an information imbalance is considered fraudulent, and thus it is stolen property that cannot be considered profit at all.

C. Information is the most important currency, which implies that in situations of information imbalance, the market is not efficient.

D. Some parties to a transaction will not know the amount of profit made, and thus will not be aware of the amount of value.

Answer 1

The correct answers are:-

1)

B. Corporations only influence the economy, not culture.

2) Imperfect information may lead to higher or lower profits because of the consumer's inability to price a product or service fairly.

A. With imperfect information, one party cannot judge how much they value something, and thus their willingness to pay/accept won't reflect value.