What is rent seeking and how does it influence the inefficiency of monopoly?
What will be an ideal response?
Rent seeking is the pursuit of wealth by capturing economic rent. Any surplus—consumer surplus, producer surplus, or economic profit—is called economic rent. There are two forms of rent seeking activity to pursue a monopoly status: i) Buying a monopoly, where a person expends resources seeking to purchase monopoly rights for a price slightly less than the monopoly profit, or ii) Creating a monopoly, where a person expends resources seeking political influence, such as lobbying legislators to provide preferential market status by restricting domestic or international competition. The resources expended in rent seeking can be equal to the economic profit that a monopoly status would create for the owner.
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Which of the following causes the aggregate production function to shift up?
A) An increase in capital stock B) A decrease in the productivity of workers C) An improvement in technology D) An increase in the total efficiency units of labor
Studies by economists have tended to show that countries with more independent central banks have
A) lower unemployment. B) more inflation. C) higher unemployment. D) less inflation.
Expansionary fiscal policy normally lowers interest rates
a. True b. False Indicate whether the statement is true or false
A negative income tax system is designed to
a. provide in-kind benefits to the poor. b. provide a minimum income to the poor. c. reduce taxes on the rich when their incomes surpass the maximum income tax bracket. d. subsidize food consumption in poor families.