Government as a Regulator

How Government Regulates Business

• In some cases, government helps people so that they are not abused by businesses.

• To fulfill these duties, local, state, and national governments pass laws to protect and regulate business.

  • There are three levels of government: federal, state, and local.

• The federal government oversees interstate commerce.

  • Interstate commerce is business that takes place between states.

• State governments oversee intrastate commerce.

  • Intrastate commerce is business that takes place within states.

• Companies that break the law can be fined, sued, or forced to close.

• A monopoly occurs when a company controls an industry or is the only one to offer a product or service.

• An oligopoly occurs when a small number of companies control an industry.

• Companies can also form a monopoly by establishing a trust.

  • A trust is a group of companies that band together to form a monopoly and cut out competition.

• The U.S. government passed antitrust laws to promote competition.

  • Antitrust laws allow the federal government to break up monopolies, regulate them, or take control of them.

  • The government formed the Federal Trade Commission (FTC) to enforce antitrust laws.

• One of the most basic ways the government protects business is by enforcing contracts.

• A contract is a legally enforceable agreement between two or more parties.

  • It can be written, verbal, or even formed over a handshake

• Breach of contract occurs when one party fails to live up to the terms of a contract.

• A copyright gives artists the legal right to own their creations.

• A patent is a legal grant for the sole right to own an invention

• A trademark is a name, a symbol, or a characteristic that identifies a product.

• The government also steers economic activity by regulating the production process.

  • The Food and Drug Administration (FDA) regulates the manufacture and sale of drugs in the United States.

Government as Provider

Government’s Role in Society

• Government is the largest provider of services in the country.

• Highways, bridges, water treatment plants, and national defense are examples of public goods and services.

• Public goods and services are items provided by government and paid for using tax money.

• Other services promote social welfare.

• Government provides parks, libraries, museums, and swimming pools.

• Governments pay for them with revenues they receive.

  • Revenue is the income that governments get from all sources.

    • Revenue is also money that comes into a business from the sale of goods and services.

• In some cases, a business may provide a public good or service.

• Privatization occurs when a business offers a public good or service

  • For example, most cafés in government buildings are run by private businesses, not the government.

• A transfer payment is a government expense that is provided to help people.

• These payments ensure that people have money when they need it.

  • Unemployment, Social Security, and veterans’ benefits are forms of transfer payments.

• The government is the largest employer in the United States.

• Government is also the largest consumer of goods and services.

• The SBA offers loans and advice to people who want to open small businesses.

• The U.S. government helps some businesses compete internationally by providing subsidies.

  • Subsidies are monetary grants given to producers or consumers to encourage certain behaviors.

How Government Is Funded

• A tax is an amount of money people and businesses pay governments to help run the nation, state, county, city, or town.

  • The purpose of taxes is to pay for public goods and services by spreading the cost among many people.

• Each level of government collects taxes for different kinds of services

• The government provides many incentives to businesses and consumers.

• A tax incentive is a temporary reduction or elimination of a tax that is meant to encourage or discourage an activity.

• A tax break is a special tax benefit given to promote specific economic or social objectives.

How Government Allocates Resources

• Governments allocate resources by deciding the best ways to spend tax revenues.

• They determine which projects are priorities for funding.

• Government spending also affects the distribution of income.