Managerial Economics Question Set Before Reaction Paper

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No matter the exact figure, however, Sarah would have to earn an additional amount equal to the difference between renting an buying the building, as both options represent divergent investment strategies.

2.) According to Milton Friedman, "Business has only one social responsibility, to make profits (as long as it stays within the legal and moral rules of the game established by society). Few trends could so thoroughly undermine the very foundations of our society as the acceptance by corporate officials of a social responsibility other than to make as much money for their stockholders as possible." Explain why you agree with such a statement.

This controversial statement by respected economist Milton Friedman poses an intriguing dilemma for executives to consider: What is a company's first and foremost priority, the generation of wealth or acting in a socially responsible manner? By flatly asserting that an enterprise possesses a sole social responsibility, to increase profit margins and pay dividends to stockholders, Friedman is launching a defense of capitalism's theoretical foundations. With the national economy in freefall since 2007, however, major corporations are now accepting taxpayer-funded government bailouts, and average consumers are paying far more for basic goods and services than they have before, which forces one to reconsider the accuracy of Friedman's platform.

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If a company has no further social responsibility than the creation of profits, as Friedman declares, than it would be reasonable to extend that premise to mean that society has no further responsibility to support a company when profit margins are erased and bankruptcy looms. The federal government has consistently demonstrated that society is willing to prop a failing company up momentarily, provided that company's executive management achieve a reversal of fortune and return to a profitable business model, so the concept of reciprocity would suggest that major corporations should return the favor. If General Motors and Citibank, both recipients of taxpayer-funded bailouts to remain viable, had adopted the social responsibility policies enacted and embraced by Target, rather than gamble on risky investment strategies in the pursuit of greater….....

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