market failure approach to business ethics; joseph heath

Question 1

what is joseph heath’s opinion about profit-maximization?

Answer 1

that it should be understood as an obligation rather than an expression of self-interest

Question 2

according to joseph, what is business ethics best understood as?

Answer 2

as a set of additional constraints precent legally permissible, but not normatively justifiable, profit-maximization strategies

Question 3

moral justification =

Answer 3

when there is a straightforward conflict between our self-interest and out moral obligation, the moral obligations win, at least from the moral point of view.

Question 4

moral dilemma =

Answer 4

when available choices and obligations do not allow for moral outcomes. in such instance, a choice or action is anticipated or required

Question 5

according to stark, was conventional business ethics relevant or irrelevant for most managers?

Answer 5

irrelevant

Question 6

limited liability =

Answer 6

the ability to insulate private resources from those of the corporation, so that they can not be pursued by creditors in the event of default

Question 7

what is the problem with the lockean view?

Answer 7

corporations are not individuals. they are highly artificial constructs, creating a corporation is seen as a privilege not a right

Question 8

what is the price mechanism valued for?

Answer 8

its efficiency effects; it allows us to minimize waste

Question 9

explain the invisible hand thereom / the first fundamental theory of welfare economics (FFT)

Answer 9

it suggests that the outcome of a perfectly competitive market economy will be pareto optimal

Question 9

explain pareto optimal outcome

Answer 9

it is not possible to improve anyone’s condition without worsening someone else’s.

Question 10

according to friedman what is the social responsibility of business?

Answer 10

to increase its profits
managers are in the position to

Question 11

what is the comparison that friedman makes?

Answer 11

as the lawyer is expected to advance the interest of its client, not his own

Question 12

does joseph heath agree with friedman or not? why (not)?

Answer 12

no, he says the manager is not the personal servant os the shareholder and is not obligated to do what the shareholder wants.

Question 13

in a free economy, what is the one social responsibility for business?

Answer 13

to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game.

Question 14

what is the problem with deception?

Answer 14

it violates one of the conditions needed for the economy to achieve an efficient outcome

Question 15

constraints that must be satisfied in order for the pareto conditions to obtain is

Answer 15

that information must be symmetric

Question 16

how should an ethical corporation behave in a deontically perfect world in which everyone could be counted to comply with all moral requirements?

Answer 16

The firm should behave as though market conditions were perfectly competitive, even though they may not in fact be

Question 17

5 types of market failures are:

Answer 17

1. asymmetric information
2. concentrated market power (monopoly)
3. externalities
4. public goods
5. de-merit goods

Question 18

according to joseph heath, how would it be possible to make the case for any further social responsibility?

Answer 18

by charging consumers the full price that production of their goods imposes upon society

Question 19

what is the second best theorem

Answer 19

while perfect competition generates a perfectly efficient outcome, a situation as close as possible to perfect competition will not generate an outcome that is as close as possible to perfect efficiency.