How does government's power to coerce behavior tend to reduce private-sector risk?

Question

Quizplus · Accepted Answer

The government's ability to enforce contracts and prevent illegal behavior helps to protect private property rights and reduce uncertainty for private-sector firms. This can ultimately lead to a reduction in risk for these firms.

Answer: D
 The coercive power of government can increase risk and uncertainty for private-sector firms if it involves unpredictable or arbitrary use of force or regulation. For example, sudden changes in tax laws or regulations can disrupt business plans and strategies, leading to increased risk for firms.

How Does Government's Power to Coerce Behavior Tend to Reduce