Rent seeking
A)is a variable cost and with rent seeking the monopoly becomes more efficient.
B)decreases average total cost and with rent seeking the monopoly becomes more efficient.
C)increases deadweight loss above the original monopoly deadweight loss,but the monopoly continues to produce the same inefficient quantity.
D)decreases consumer surplus and with rent seeking the monopoly becomes more efficient.
E)decreases deadweight loss.

Question

Quizplus · Accepted Answer

Rent seeking is when a monopoly spends resources on maintaining their monopoly position, such as lobbying for government favors or fighting off potential competition. This results in an additional cost for the firm, which leads to an increase in deadweight loss above the original monopoly deadweight loss. However, the monopoly continues to produce the same inefficient quantity, so it is not becoming more efficient. It is only increasing its profit at the expense of society's welfare. Therefore, option C is the correct choice.

Rent Seeking