Final answer:
The government promotes competition among firms by passing legislation that prevents price-fixing, enforcing antitrust laws, and utilizing public disclosure to increase market transparency.
Step-by-step explanation:
The action by the government that would promote competition among firms is passing legislation that prevents price-fixing. This type of legislation is designed to prohibit firms from collaborating to set prices at a certain level, which undermines competition and potentially harms consumers by keeping prices artificially high. These laws are an example of anti-monopoly legislation, which aims to maintain competition in the marketplace and prevent a single firm or a group of firms from dominating an industry, thus ensuring more choices and potentially lower prices for consumers.
To preserve competition, the federal government enforces antitrust laws which include monitoring mergers to ensure they do not reduce competition, ending restrictive practices like exclusive contracts that can unfairly limit market access, and regulating natural monopolies through price caps. Public disclosure can be a powerful tool in preventing market failures by increasing transparency, making it harder for firms to engage in anticompetitive behavior without being detected.