The difference between governmental choices and the choices of businesses lies in the collective nature of the former and individual choices in the case of the latter. Collective choices of the government are usually much more far-reaching than those of other groups, as the government has the power to enforce their decisions through imprisoning, taxation and penalizing. Even though it seems like an easy job to accomplish at the first sight, government has to respond to a variety of constituents, which created different tensions legislative powers have to deal at the federal, local and state level. In response to these conflicting demands, the US economy is a mix of free markets, heavily regulated industries and other areas, that have limited entry but are not directly regulated. Governments affect businesses in three ways: by creating incentives for certain types of behavior; by providing support for production and exchange; and by limiting some activities.

Creating incentives for certain types of behavior

Patents or intellectual property laws represent the governmental actions to protect investors efforts by giving them sole rights for a product or new technology for specific period of time. Such policies create greater incentives for the corporations to invest in the Research and Development projects. Patent protection ensures that the better quality of life is attained through the increased production of goods and services. Tax policies are often used to encourage/discourage certain types of businesses to finance their investment with debt. When the Investment Tax Credit (ITC) is used, companies purchasing long live assets earn a tax reduction. In order to encourage competition and help the start-up companies in the region, local or state government would offer tax reduction or other type of support, like low-interest loans, called industrial development bonds. Therefore, incentives made on the part of the government can have a significant effects on business decisions, and it is the responsibility of the company's manager to take advantage of them.

Determining the appropriate amount of governmental intervention and protection should be weighted in terms of its costs and benefits, as consumers end up paying for product-safety verification, environmental protection, product quality and workers safety. Even though there are truth - in advertising laws that prohibit manufacturing companies to provide incorrect information about their product, we all have experienced how skillfully the words can be switched and changed around in the media to deliver completely different picture of the product to the helpless in that situation consumer, who assumes information to be relevant and protected by the government. Just like consumer - protection laws, environmental laws are supposed to protect consumer and ensure the clean supply of air and water, while in reality, if the government is interested in a particular industry or company, it will let the policies slide. There is no correct and definite answer as to how much of the governmental intervention is really needed in the economy, as the absence or excess of it both seem to cause great problems.