Question

Define rent seeking. Rent seeking is attempting to transfer surplus from one group to another, for firms it usually involves: restricting supply in order to increase price. restricting supply in order to decrease price. increasing supply in order to decrease price. increasing supply in order to increase price. Do firms have a greater incentive to engage in rent-seeking behavior when demand is elastic or when it is inelastic?

Answer 1

For firms, Rent Seeking usually involves: restricting supply in order to increase price

Step-by-step explanation:

An example of rent-seeking in a modern economy is spending money on lobbying for government subsidies in order to be given wealth that has already been created, or to impose regulations on competitors, in order to increase market share.

A rent seeking firm have a greater incentive to engage in rent-seeking behavior when demand is elastic because the restriction imposed on competitors will not affect the demand for the goods.