Question 1

In which of the following ideas are the ethical roots of the economic model of corporate social responsibility found?

Accepted Answer

B

Question 2

The management of an online retailer is mostly interested in implementing strategies and pushing policies that result in the utilization of their stockholders' property to serve the interests of its employees and the local community. The defenders of which of the following models are likely to consider these actions as theft?

Accepted Answer

Defenders of the economic model of corporate social responsibility would likely consider these actions as theft because this model emphasizes the primary responsibility of businesses to maximize shareholder value. Thus, using shareholders' resources primarily for the benefit of employees and the local community, rather than focusing on profit maximization for shareholders, could be viewed as misappropriating shareholders' assets.

Question 3

Which of the following statements does not represent a market failure, a situation in which the pursuit of profit will not result in a net increase in consumer satisfaction?

Accepted Answer

C) represents a situation where market failure has been corrected by internalizing externalities, meaning the true costs and benefits are reflected in the exchange price, leading to an efficient market outcome.

Question 4

Which of the following statements is true of the stakeholder model of corporate social responsibility?

Accepted Answer

The stakeholder model of corporate social responsibility emphasizes that business decisions impact a broad range of individuals, including but not limited to shareholders, employees, customers, and the community at large. It advocates for considering the interests of all these parties in the decision-making process.

Question 5

The free market, or neoclassical, theory of corporate social responsibility relies on utilitarianism and the concepts of individual rights to freedom and property for its ethical justification.

Accepted Answer

The free market or neoclassical theory of corporate social responsibility (CSR) indeed draws on utilitarian principles and the concepts of individual rights, including freedom and property. This perspective argues that the primary responsibility of corporations is to their shareholders, and that ethical obligations are met by maximizing shareholder value within the bounds of the law and basic ethical norms. This approach relies on the belief that a free market, guided by the invisible hand and individual self-interest, will lead to the most efficient and beneficial outcomes for society.

Question 6

To use a company's resources for a project that does not contribute to maximizing profits is sometimes acceptable and even sometimes required under the economic model of corporate social responsibility.

Accepted Answer

The economic model of corporate social responsibility focuses on maximizing profits, and using resources for non-profit-maximizing projects is generally not aligned with this model.

Question 7

If the costs of externalities like air pollution, ground water contamination and depletion, soil erosion, and nuclear waste disposal are borne by parties who are not involved in the exchange between buyer and seller, the exchange price does not represent an equilibrium between true costs and benefits.

Accepted Answer

When externalities such as air pollution and soil erosion are not accounted for in the exchange price, the true costs are not reflected, leading to a price that does not represent an equilibrium between the actual costs and benefits. This is because externalities impose costs or benefits on third parties not involved in the transaction, distorting the market outcome.

Question 8

There is no reason to believe that ad hoc attempts to repair market failures, such as determining shadow prices for unpriced social goods, or exempting social goods from the market, or using the law to address social goods that are unattainable through individual choice, are socially inadequate.

Accepted Answer

Ad hoc attempts to repair market failures, such as determining shadow prices for unpriced social goods, exempting social goods from the market, or using the law to address social goods that are unattainable through individual choice, can be socially inadequate because they may not fully capture the true value of these goods, may lead to inefficiencies, or may not address the root causes of the market failure.

Question 9

According to the private property defense of the economic model of corporate social responsibility, any use of a corporation's resources for any purpose other than maximizing profits is a violation of the owners' property rights and amounts to theft.

Accepted Answer

The private property defense of the economic model of corporate social responsibility posits that a corporation's primary obligation is to its shareholders, and thus, utilizing resources for purposes other than maximizing profits—such as social or environmental causes—violates the property rights of the owners. This perspective views the corporation as the property of its shareholders, and any diversion of profits or resources for non-profit-maximizing purposes without explicit consent is considered akin to theft.

Question 10

Bowie's Kantian model of corporate social responsibility obliges managers to do no harm, but they must also be prepared at times to do some good or prevent some harm.

Accepted Answer

The answer of Bowie's Kantian model of corporate social responsibility...

Question 11

The stakeholder theory of corporate social responsibility is totally incompatible with the utilitarian ethical theory because the stakeholder concept requires balancing the interests of all the parties affected by business decisions.

Accepted Answer

Stakeholder theory and utilitarian ethical theory can be compatible as both aim to consider the impacts of business decisions on various parties, with utilitarianism focusing on the greatest good for the greatest number, which can include stakeholders' interests.

Question 12

A wider interpretation of the meaning of a stakeholder as any affected party places an impossible burden on managers who would have to account for everyone who might be affected by a business decision.

Accepted Answer

Expanding the definition of a stakeholder to include anyone affected by a business decision significantly increases the number of individuals and groups a manager must consider, making it practically difficult to account for all potential impacts and interests.

Question 13

The free market theory provides the rationale for the responsibility of managers to make as much money for their stockholders as possible.

Accepted Answer

The free market theory, as advocated by economists like Milton Friedman, posits that the primary responsibility of business managers is to maximize shareholder value, which translates to making as much money for stockholders as possible within the bounds of the law and ethical standards.

Question 14

The significance of the moral minimum approach lies in its recognition that compliance with the law is insufficient for being an ethically responsible business.

Accepted Answer

The moral minimum approach suggests that merely following the law is not enough for a business to be considered ethically responsible; it must also actively seek to do no harm beyond what is legally required, indicating a higher standard of ethical behavior.

Question 15

Market failures occur in a variety of situations in which the pursuit of profit will not result in a net increase in consumer satisfaction because in these situations markets fail to do what they were designed to do.

Accepted Answer

Market failures occur when the allocation of goods and services by a free market is not efficient, often leading to a net loss in economic welfare. Situations such as public goods, externalities, and information asymmetries can prevent markets from maximizing consumer satisfaction, thus failing to achieve what they are theoretically designed to do, which is to allocate resources in a way that maximizes consumer and societal welfare.

Question 16

Prisoners' dilemma cases are examples of situations in which cooperation does not have a more optimal outcome than competition.

Accepted Answer

In the Prisoners' Dilemma, cooperation between the two prisoners (or players) leads to a more optimal outcome for both than if they choose to compete (or betray each other).

Question 17

Milton Friedman did not recognize that there are limits to the pursuit of profits.

Accepted Answer

Milton Friedman acknowledged that the pursuit of profits should be within the bounds of the law and ethical custom, indicating he recognized limits to profit-seeking activities.

Question 18

The pursuit of profit is the mechanism by which a business is thought to serve the utilitarian goal of satisfying consumer demand, thereby maximizing the overall good.

Accepted Answer

The pursuit of profit motivates businesses to produce goods and services that consumers demand. By efficiently allocating resources to meet these demands, businesses contribute to maximizing societal welfare, aligning with utilitarian principles of achieving the greatest good for the greatest number.

Question 19

Utilitarian ethics directs us to maximize happiness.

Accepted Answer

Utilitarian ethics, a form of consequentialism, holds that the best action is the one that maximizes happiness or pleasure for the greatest number of people.

Question 20

Efficient markets guarantee that an ethically worthy outcome has been achieved.

Accepted Answer

Efficient markets focus on the allocation of resources in a way that maximizes the sum of consumer and producer surplus, but they do not inherently address ethical considerations or ensure ethically worthy outcomes.

Quiz 3: Corporate Social Responsibility