Describe how rent-seeking behavior works

Question

Please provide the best answer for the statement.

Answer 1

Rent-seeking behavior occurs when government action results in a transfer of wealth at society’s or someone else’s expense. In this case, the term “rent” means any profit or income to a business, a resource owner, or other organization that is above that which would be paid to the individual, corporation or group under competitive market conditions. The government is able to distribute the rent through laws, rules, hiring practices, or purchases. Some examples of rent-seeking include occupational licensing beyond that needed to protect consumers, tariffs on imported products designed to protect businesses from foreign competition, and tax breaks or tax subsidies for particular businesses.