Question

What is the purpose of governmental regulations on business?

Answer 1

The answer would be B as government regulations are put in place to protect employee's and customer's rights

Answer 2

Answer:

B: To ensure fair business practices and that citizens are protected.

Explanation:

Government intervention in the regulation of business is any action taken by the government or other public entity that affects the market economy with the direct objective of having an impact on the economy, beyond the mere regulation of contracts and provisions of public goods.

Government intervention is to advocate the use of different economic policies to compensate for the defects in the economic system that lead to imbalances. This is based on the idea that the law of supply and demand is not sufficient to ensure a balance in the economy and government intervention has to be used to ensure its proper functioning.

However, the government has to be cautious in applying and setting these regulations as incorrect implementation can lead to a harmful market structure. To achieve an optimal level of regulation, governments should analyze and determine whether natural monopolies can be maintained by setting a lower total cost. If this is the case, the government will have to ensure that the company does not earn excessive revenues and that prices are kept at fair levels. Otherwise, if the total costs of the industry decrease if new companies enter the market, the government should regulate their entry. Essentially, what governments should do is balance the conflict between profitability and efficiency in the industry.