Question

When economists use the term "laissez-faire," what economic idea are they referring to?

Answer 1

When economists use the term "laissez-faire," they are referring to the idea that "C. Government should not interfere with business practices", since this term implies a "hands off" approach to the economy. 

Answer 2

Answer:  C. Government should not interfere with business practices.

Further detail:

The terminology of "laissez-faire" has been used in economics since the 18th century Enlightenment era.  "Laissez-faire" is French for "let do."  You can think of it as letting the economy do its own thing, without governments trying to interfere with it or control it.  This was an idea promoted by the Physiocrats in 18th century France.  They called themselves "Physiocrats" (those who believed in "rule by nature") because they thought trade and commerce should be allowed to proceed naturally.

The Scottish philosopher Adam Smith picked up on this idea also and promoted a capitalist economy in opposition to what he called a "mercantilist" economy where governments gave monopolies to certain merchants and tried to control business affairs.