Why does rent-seeking behavior lead to deadweight loss?
A monopoly firm is insulated from direct competition, but there may still be a competition to obtain the monopoly, a process known as rent-seeking. For instance, cable television providers compete for monopoly franchises to serve a city, but this competition is costly. Prospective providers often hire lobbyists, lawyers, and economists to convince the city's government that they are better suited to run the system than rival applicants. Used for this purpose, these resources are unavailable to produce other goods and services that consumers value. This leads to a deadweight loss.
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Suppose the following information describes the economy:Government purchases of goods and services1,000Household saving1,000Government transfers and interest payments500Tax collections500Business saving1,500Private saving equals ____and public saving equals ________.
A. 2,500; 0 B. 2,500; -1,000 C. 1,000; -500 D. 1,000; 0
Economies of scale are an important determinant of comparative advantage based trade
Indicate whether the statement is true or false
Government regulations requiring firms that desire to sell securities in financial markets to disclose all available information
A) eliminate the adverse selection problem (when rigorously enforced). B) increase the difficulty that young firms may have in raising funds. C) eliminate the moral hazard problem in securities markets. D) fail to eliminate the adverse selection problem, in part because they do not greatly reduce the difficulty that young firms have in raising funds.
A supply curve that is parallel to the price axis is
A) perfectly elastic. B) perfectly inelastic. C) relatively inelastic. D) unitary elastic.