1. The Role of Government
Chapter 7 section 3 Notes

2. A. MAINTAIN COMPETITION
When the markets fail, the government can step in to fix the problem
When has the government had to “step in” to regulate a business?
What are some products that have been recalled?
Campbell Soup Co. is issuing a voluntary recall of 355,000 cans of SpaghettiOs due to a potential choking hazard.
The recall covers 14.2 oz cans of SpaghettiOs Original with a date of Feb 22, 2017, and a UPC code of
Ignite Recalls Kids Straw Tumblers Due to Risk of Ingestion
If a child chews on the drinking straw, small pieces can break off into the child’s mouth, posing a risk of ingestion or aspiration of the small part.

3. A. Maintain Competition continued
1. protect the public from unreasonable risks of serious injury or death
-U.S. Consumer Product Safety Commission (SPSC) protects the public from false claims & harmful products
-they recall products from repair or replacement

4. #2: Maintain Competition
-prevent monopolies & unfair business practices
- prohibiting market structures that are not competitive
-antitrust legislation; the government restricts monopolies & trusts (combination of firms designed to restrict competition or control prices)
-1890 Sherman Antitrust Act
- first significant law to discourage monopolies
Why is it better for the consumer if the government breaks up a monopoly?
Prevent excess price, improve quality of service, promote competition and improved safety for the consumer.

5. 3. Government Regulation
-regulate industries where monopolies serve the public good
-regulating markets where full competition is not possible
-not all monopolies are bad & should not be broken up
-Example: Natural monopolies (lower production costs)
-the govt. regulates its activities so they can’t take
advantage of its customers (cable t.v., water, electric)
-if they want to raise their rates, they must have govt.
approval
-Why is it best to have the government regulate our water
companies? **Threat to our health and safety
-Why is it best to have the government regulate the electric
companies?
**Competing companies poles/lines in our infrastructure

6. B. Improve Economic Efficiency
1. provide public goods-goods that are not provided by private
businesses
-Why do private businesses choose NOT to provide public goods?
_No incentive for them $$$$___
-roads, museums, education, libraries
-there is no financial gain for private businesses to provide these goods
-these goods do make the economy more productive

7. Modified Free Enterprise
-because the govt. is involved in certain parts of our economy, we are not a true free enterprise, we are a modified free enterprise
Give 3 examples where the government is involved in our economy
1. Regulate businesses for safe products
2. Regulate businesses so they do not pollute the
environment.
3. Regulate health and safety standards promoting
worker safety. Including the minimum wage.