Why does the government intervene in business activities?

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rrteacher | College Teacher | (Level 2) Educator Emeritus

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In the United States, local, state, and federal government can intervene in business for a variety of reasons. One reason historically has been to preserve competition by enforcing anti-trust legislation. These laws are intended to inhibit the formation of monopolies. Another reason might be to promote workplace safety, or to protect workers' rights, such as the right to a minimum wage, a maximum work week, the right to organize, or the right to work in an environment free from discrimination. Still another reason is to protect the environment by mandating measures to limit pollutants. In addition to these regulatory functions, governments often intervene to promote business and industry through tax breaks or credits, legislation encouraging small business loans, or through manipulation of the monetary system to facilitate the flow of capital. 

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g70606 | Student, Grade 11 | (Level 1) eNoter

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1) The govt intervene in business activity to ensure their is fairness in the business,i.e the consumers are not exploited in terms of higher prices like for example in the case of a monopoly.

2) The govt intervene to ensure that adequate goods and services are being produce at the socially most desirable price and ensures that merit goods are not underproduced and luxurious goods are not overproduce. this term is also referred to as pareto optimality

3) The govt intervene to reduce negative externalities such as pollution and others through taxation and legislation.

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