The main reason why the government enforces contracts and maintains a legal system that punishes those who violate contracts is:
A) to increase uncertainty.
B) to decrease imperfect competition.
C) to decrease imperfect information.
D) to facilitate exchange.

Question

Quizplus · Accepted Answer

The main reason why the government enforces contracts and maintains a legal system that punishes those who violate contracts is to facilitate exchange. Without a legal system, individuals and firms may not feel secure in entering into contracts, as the risk of noncompliance or fraud would be too high. By enforcing contracts and punishing violators, the legal system creates a reliable framework for exchange and encourages more economic activity.

The Main Reason Why the Government Enforces Contracts and Maintains