Question

Why do businesses compete in a free enterprise system?

Answer 1

Free enterprise is the term used to designate the concept of business in the market economy of the capitalist economic system, which is based on the ethics of individual freedom. According to liberal economic theory it is an essential concept for the theoretical operation without restrictions of a free market of perfect competition, without coercive monopolies or distortions due to state interventionism (fifth power).

Therefore companies that are within this system must compete with each other, to maximize their benefits and ideas. Within this system companies prosper only if they are productive and effective.

Answer 2

Businesses compete in a free enterprise system because these systems exist in a capitalist environment, wherein the company with the "best idea" or product makes the sale and thus a profit--thus fostering competition.