Question

Discussion Questions:

1. If opportunity cost is more intellectually satisfying way of measuring costs of an action than accounting cost, why do businesses use accounting cost?

2. Many people agree that corporations should be socially responsible. However, Milton Friedman denied the social responsibility of corporations by saying that the only corporate responsibility is to make profit. Who is right? Why?

3. President Trump promises to lower business taxes to a level comparable to some of the lowest business taxing states around the world. What are his reasons? If the President delivers on his promise, what do you think would be consequences?

Answer 1

1. The reason this is so is that accounting cost is something tangible while opportunity cost does not have a particular value though it is important. This is the reason accounting cost is used.

2. Friedman is right in that firms will only look at their profitability and so they hould focus on their profit targets. So only corporate targets achieve profits. Friedman is right.

3. The idea of the president to try and boost busineses and encourage them to invest greater and help raise employment. If the president follows through this will raise growth but has to be carefully doctored so that only particular firms are not benefitted.