Which of the following best describes the function of government in a market economy?

In a market economy, the primary function of government is to encourage exchange. This encompasses creating a stable environment where buyers and sellers can engage in transactions with confidence. Governments facilitate trade by establishing and maintaining the legal framework, infrastructure, and regulatory systems that are necessary for commerce to thrive. This includes protecting property rights, which reassures individuals and businesses that their assets are secure and can be freely traded.

Additionally, by ensuring that there are fair and accessible channels for exchange, the government promotes competition, which leads to better products and services for consumers. By fostering economic activity through supportive policies and regulations, the government plays a crucial role in enabling the market mechanisms to work effectively.

In contrast, eliminating competition or solely regulating prices would undermine the principles of a market economy, which relies on competition to drive innovation and efficiency. Enforcing contracts is also an important duty of government but serves more as a means to sustain the exchange process rather than being the primary function itself.