When there is imperfect competition, the role of the government is to:
A) take over production.
B) foster competition.
C) tell the firms how much to produce.
D) all of the above

Question

Quizplus · Accepted Answer

When there is imperfect competition, the government's role is to foster competition. This can be done through policies that promote new entrants into the market, prevent mergers or acquisitions that would lead to a monopoly, and enforce antitrust laws that prohibit unfair business practices. Taking over production or telling firms how much to produce would not address the issue of imperfect competition and may lead to inefficiencies in the market.

When There Is Imperfect Competition, the Role of the Government