Question

Why does the free-market system require government regulation? Companies can't be efficient or innovative on their own. Foreign competition would wipe out domestic production. Producers are driven by the profit motive to work against competition. Consumers don't purchase enough to drive economic growth.

Answer 1

Answer:

The correct answer are the option B and C: Foreign competition would wipe out domestic production and producers are driven by the profit motive to work against competition.

Explanation:

First of all, the huge companies, and that includes the foreign competition, will always wipe out the small ones and that situation will definitely impact in the domestic economy of a country by leaving without work to the other enterprises and their employees, also by increasing prices and obligating to the customers to buy them due to their power in the industry and more. That is why, government regulation is obviously needed in the free-market system because if there is not, then the leader organization will do as they please with the market.

Secondly, the companies are lucrative organization and therefore that the most important thing that they care about is to make money by producing goods or giving services to the community that need it. That is why, if there is not government then the most powerful companies would try to eliminate the small ones by taking all their consumers away.