What are two benefits of the new miles-per-gallon requirements? ...

[clmills979]

What are two benefits of the new miles-per-gallon requirements? Are these benefits in someone's self-interest or in the social interest?
 
  What will be an ideal response?

Question 2

In the 1980s the CEO of Coca Cola corporation found out that its core business was making roughly 15 rate of return on investor capital.
 
  However, he also discovered that some of the newly acquired subsidiaries were not making anywhere near that amount. He decided to ask each of these companies to come up with a plan to push the rate of return closer to the 15 mark or he warned that these companies might be sold. Why would the CEO sell off companies or operations that are still profitable?

[cpetit11]

Answer to Question 1

Two benefits of the new miles-per-gallon requirements are: (1) less gasoline will be used, and (2) carbon emissions will be lowered. Con-sumers benefit from the new mileage standards because their expenditure on gasoline will decrease which enables them to increase their consump-tion of some other goods and services. It is also in the social interest be-cause more gasoline, or oil from which gasoline is made, is available for other uses. Lower carbon emissions are in the self-interest of everyone and in the social interest because these emissions cause global warming.

Answer to Question 2

The opportunity cost of holding on to companies or operations that are making less than the core business is the difference in the profitability. Therefore, Coca Cola and its executive probably reasoned correctly that it could take sell those companies that were not hitting the 15 mark and reinvest the money in the areas of the company that were hitting the target rate of return.