Which of the following is the best example of "rent seeking"?
A)The government imposes a pollution tax on firms to eliminate a negative externality.
B)A municipal government chooses the lowest bid for construction of a new water system.
C)Owners of aerospace firms receive government subsidies to make the firms more competitive in world markets.
D)Costly renovations are made to the roof of the Parliament Buildings in Ottawa.
E)Taxpayer funds are used for snow removal on public streets.

Question

Quizplus · Accepted Answer

Rent seeking refers to actions taken by individuals or firms to obtain economic gain through governmental interventions rather than by trade and production of goods and services. Choice C exemplifies this as the owners of aerospace firms receive government subsidies to make the firms more competitive in world markets, rather than improving their firms through innovation and competition. Choices A, B, D and E do not demonstrate rent seeking as they involve legitimate government actions to address public goods, market competition and public works.

Which of the Following Is the Best Example of "Rent