With which one of the following would the economists mentioned in the passage be most likely to agree?

Dustin on September 29, 2019

Why not "A"

The article specifically states, in line 30, that "The economists' view is that even if such a CEO's purpose is to look to the public good and nothing else, the CEO should still work to maximize profits, because that will turn out best for the public anyway." Does this not indicate that the economists would recommend that even charitable organizations seek to maximize profits?

1 Reply

Irina on September 29, 2019


The statement that you reference only concerns non-charitable organizations. In fact, the paragraph starts with "CEO's primary responsibility is to owners, whose primary interest, except in charitable institutions, is the protection of their profits," and then provides an example "suppose a non charitable organization is owner operated...." Notice that all these statements only apply to non charitable organizations. The other issue with (A) is that it is too strong of a statement generally. The economists only tell us that a non charitable organization CEOs have a responsibility to maximize profits for their shareholders, but CEOs in owner-operated non charitable organizations have no such obligation (lines 28-30), and nothing in the passage suggests that a charitable organization CEO would have obligations similar to the CEO of a shareholder-owned corporation.

Let me know if you have any further questions.