Question

Why do governments create policies to regulate businesses?

a) To stifle economic growth.

b) To increase business profits.

c) To protect consumers and maintain order in the marketplace.

d) To promote monopolies.

Answer 1

Governments create policies to regulate businesses to protect consumers, ensure fair competition, and maintain order in the marketplace. These regulations include blocking harmful mergers, imposing price caps on monopolies, and enforcing laws related to contracts, taxes, and public welfare.

Step-by-step explanation:

Government policies are created to regulate businesses primarily to protect consumers and maintain order in the marketplace. The correct answer to the question 'Why do governments create policies to regulate businesses?' is to c) protect consumers and maintain order in the marketplace. This is achieved through various means, such as blocking anticompetitive mergers, ending restrictive practices, imposing price cap regulation on natural monopolies, and promoting deregulation when appropriate to encourage competition.

Government intervention also helps enforce contracts, collect taxes, and safeguards public interests, including health and the environment. Furthermore, governments may step in to set price controls to protect consumers or producers from harmful practices. The roles that the government plays—as regulator, protector, provider, consumer, and promoter—are all aimed at ensuring a competitive and fair economic environment.