Explain the meaning of the term rent seeking and illustrate graphically how it could undermine efficiency...

Explain the meaning of the term rent seeking and illustrate graphically how it could undermine efficiency in the economy

Solutions

Expert Solution

It shall be noted that Rent seeking is an economic concept that occurs when an entity seeks to gain added wealth without any reciprocal contribution of productivity. An example of rent seeking is when a company lobbies the government for foreign company entry-restrictions, grants, subsidies, or tariff protection. Businesses can lobby the government for help in the areas of competition, special subsidies, grants, and tariff protection. If a business succeeds in getting laws passed to limit their competition or create barriers to entry for others it can achieve economic rents without any added productivity or capital at risk.

Rent seeking can disrupt market efficiencies and create pricing disadvantages for market participants. It has been known to cause limited competition and high barriers to entry. Those that benefit from successful rent seeking obtain added economic rents without any added obligations. This can potentially create unfair advantages, specifically providing wealth to certain businesses that leads to greater market share at the detriment of competitors.

Thus, the rent-seeking results in dead-weight loss and undermine the efficiency in the economy.

Rahul Sunny answered 1 month ago

Next > < Previous

Related Solutions

Question 4 [14]Explain the meaning of the term ‘rent seeking’ and illustrate graphically how it could...

Question 4 [14]Explain the meaning of the term ‘rent seeking’ and illustrate graphically how it could undermine efficiency in the economy. Subject: Governmental economics 20A

Explain the meaning of monetary neutrality and illustrate graphically that there is monetary neutrality in the...

Explain the meaning of monetary neutrality and illustrate graphically that there is monetary neutrality in the long run in the aggregate demand–aggregate supply model. Be sure to label: i. the axes ii. the curves iii. the initial equilibrium values iv. the direction to which the curves shift v. the short-run equilibrium values vi. the long-run equilibrium values. Explain in words what your graph illustrates.

3. Graphically illustrate and carefully explain how the U.S. economy could achieve the macroeconomic goals of...

3. Graphically illustrate and carefully explain how the U.S. economy could achieve the macroeconomic goals of full employment, strong economic growth, and price level stability in the short-run.

Rent-seeking behavior. a. What is rent-seeking behavior? b. Explain how organized interests use the political process...

Rent-seeking behavior. a. What is rent-seeking behavior? b. Explain how organized interests use the political process to compete for benefits. Are large or small groups more likely to secure rents through the political process? Explain. c. Stigler argues that firms may support increased regulation to increase profitability. Explain why firms support regulation over subsidies to achieve their goals. Explain.

Explain the cost of "rent seeking" associated with import quota.

(20%) Explain and graphically illustrate how each of the following are likely to affect the natural...

(20%) Explain and graphically illustrate how each of the following are likely to affect the natural rate of unemployment (NAIRU) and the real wage: a. A new law banning people from seeking employment before age 18. b. Tight counter-inflationary monetary policy creates a recession. c. The government gives tax brakes to businesses that curb price increases.

Explain how, when buyers and sellers are rent-seeking competitors, they will ensure that the economic rents...

Explain how, when buyers and sellers are rent-seeking competitors, they will ensure that the economic rents from prices that are too high or too low are competed away to ensure a market-clearing price-quantity equilibrium. Be sure to explain why behaving as a price-taker is therefore a firm’s best response in equilibrium.

Explain how, when buyers and sellers are rent-seeking competitors, they will ensure that the economic rents...

Explain what rent seeking by firms is, why it is bad, and how it can be counteracted. When is rent seeking most likely to happen? Can you find a measure of how large a problem it is?

Greetings, I just got back from lunch with Suzy. Remember her? Not the one from accounting, the one who lobbies for us in Washington. Well anyway, she said there’s a bill moving through Congress that will reform the payment structure the government uses for Medicare. It actually doesn’t directly affect us at all, but Suzy was saying that bills like this are a great opportunity to slip in some “favors” that might benefit us. The idea is to get a...

Explain in words how we need to change the budget constraint graphically in order to illustrate...

Explain in words how we need to change the budget constraint graphically in order to illustrate the substitution effect. Do the same for the income effect.

Subjects