Question

Rent-seeking occurs when:

a) resources are used to deregulate a market through the political process.

b) resources are used to maximize profits.

c) resources are used to secure monopoly rights through the political process.

d) two firms try to enter the same market.

e) landlords attempt to raise the rent on tenants.

Answer 1

Rent-seeking is the action of using resources to obtain monopoly rights or advantages through the political process, often leading to market inefficiencies and hidden costs for some market participants.

Step-by-step explanation:

Rent-seeking occurs when resources are used to secure monopoly rights through the political process. An example of this would be when consumers who are also voters collaborate to push for policies like rent control laws, which are meant to cap how much landlords can increase rent annually. While such policies might appear beneficial on the surface, primarily to renters, they can lead to unintended consequences like a decrease in available rental units as landlords might choose to reduce their offerings, thereby leading to a scarcity that affects potential renters. This illustrates how rent-seeking can result in the redistribution of benefits towards certain groups, often at a hidden cost to others, marking it as an aspect of market inefficiency and a political economy concern.