ABSTRACT
So far in the bookwehave basically ignored the government and any effect that its actionsmay have on firms. In reality, however, governments affect many aspects of the firm’s behaviour. In some industries, like agriculture, governments may control output prices. Many countries have minimum wage laws that control the price of labour. There are regulations about minimum quality standards that products have to meet, particularly in the food industry and air transportation. And almost all industries are subject to environmental regulations and labour laws. At an even more abstract level, governments potentially influence every business decision made in the economy through corporate income taxes, sales taxes, and taxes on property.
