How does the concept of limited government apply to the free enterprise system?

How does the concept of limited government apply to the free enterprise system?

• A. The government controls all businesses
• B. The government restricts market choices extensively
• C. The government provides a legal framework without extensive control
• D. The government sets prices for all goods and services

Answer: (C)

The concept of limited government is integral to the functioning of a free enterprise system, as it emphasizes the importance of minimal interference in the economy. In this context, the government plays a crucial role in creating and enforcing laws that establish a legal framework for businesses to operate. This framework includes protection of property rights, enforcement of contracts, and maintenance of fair competition.

By providing this legal structure, the government fosters an environment where businesses can innovate, compete, and respond to market demands without excessive restrictions that could stifle creativity and efficiency. This balance allows for individual entrepreneurial freedom while ensuring that there are guidelines in place to protect both consumers and producers.

In contrast, options suggesting that the government controls all businesses or sets prices for all goods and services imply a level of control that contradicts the principles of free enterprise, where supply and demand dictate market behavior. Similarly, the idea that the government restricts market choices extensively also undermines the essence of free enterprise, which is defined by diverse options and the ability to meet consumer needs without heavy-handed regulation.