Georgia DECA Advertising Practice Test

What is one way the government regulates business to ensure fairness in the marketplace?

1. Encouraging monopolies

2. Discouraging price-fixing

3. Promoting exclusive contracts

4. Reducing competition

The correct answer is: Discouraging price-fixing

The correct answer is focused on discouraging price-fixing because it promotes fair competition and protects consumers. Price-fixing involves an agreement between competitors to raise, lower, or stabilize prices or market conditions, which undermines the principles of free enterprise. By regulating against such practices, the government ensures that businesses compete fairly, allowing market forces to determine prices based on supply and demand. Discouraging price-fixing helps prevent a situation where consumers could be trapped in a market with inflated prices due to collusion among sellers. This regulation fosters a competitive environment where businesses strive to offer better products and prices, ultimately benefiting consumers. In a fair marketplace, businesses must work harder to attract customers through quality and innovation, leading to a more dynamic economy. In contrast, encouraging monopolies, promoting exclusive contracts, or reducing competition tend to have negative effects on market dynamics. They can lead to higher prices and less choice for consumers, which is contrary to the aim of ensuring fairness in the marketplace.