Which of the following statements is CORRECT?
A) The ability of firms in competitive industries to voluntarily undertake socially beneficial but costly projects is constrained by competition and the need to attract capital.
B) Any action that would maximize a firm's stock price must be consistent with the maximization of social welfare.
C) Decisions regarding social and ethical behavior have no effect, either positive or negative, on firms' stock prices.
D) In a competitive industry, if one group of firms is "socially conscious" and takes costly actions designed to improve social welfare, but other firms do not, then most investors will flock to the socially conscious firms, thus enhancing their ability to attract capital. Eventually, these firms must dominate the industry.
E) Even if the government did not mandate some actions deemed to be socially responsible, such as those relating to fair hiring and environmentally sound practices, most firms in competitive markets would still pursue these policies.

Question

Quizplus · Accepted Answer

The competitive nature of the industry and the need to attract capital make it difficult for firms to undertake costly socially beneficial projects. This is because such actions may reduce their competitiveness and make them less attractive to investors.

Which of the Following Statements Is CORRECT