Final answer:
Lack of competitive pressure can result in market inefficiencies, and governments address this through anti-monopoly legislation, market transparency, and regulating natural monopolies. The government monitors mergers and restricts anti-competitive contracts to protect consumers and ensure a healthy, competitive market.
Step-by-step explanation:
Lack of competitive pressure can lead to several market inefficiencies, including higher prices, reduced innovation, and poor customer service. Without the push to improve and compete, companies may become complacent, resulting in a decline in the overall quality and availability of products and services. To address these issues, governments have various tools at their disposal, such as enforcing anti-monopoly legislation, promoting market transparency, and imposing regulations on natural monopolies.
The role of the government in preventing anti-competitive practices includes assessing mergers, like the case of AT&T and BellSouth, to ensure they don't reduce competition to a harmful level. Another governmental response is to regulate or prohibit contracts that could restrict competition. In scenarios where competition cannot flourish, such as natural monopolies, the government might regulate the price and the quantity of output to protect consumer interests.
Overall, finding a balance between corporate size and the number of competitors in a marketplace is crucial. Governments need to consider when and how to intervene in business operations to foster a competitive market that benefits consumers and sustains economic vitality.