Question

A government is laissez-faire when it

Answer 1

A government is laissez-faire when it plays a relatively inactive role in the affairs of the state. Usually this applies most to the economic realm in terms of regulation. 

Answer 2

A government is laissez-faire when it doesn't interfere with business practices.

The french term "Laissez-faire" is translated as "Let go" or "Allow to pass" in English. In economics, it refers to the doctrine of letting business do their thing, more broadly, it advocates that all business practices should be free from any government intervention or moderation (like privileges, tariffs, and subsidies), and be driven only by the market forces, this way they can prosper, and by extension society too. Laissez-faire economics are a key part of capitalism.