A firm engaging in rent seeking activity

Question

Quizplus · Accepted Answer

Rent seeking is an activity where a firm or individual spends resources to obtain a larger share of existing wealth without creating new wealth. It is not illegal, although it may lead to inefficiencies and waste of resources. The firm engaged in rent seeking activity is willing to spend up to the gain in producer surplus, meaning it is rational from their perspective as they see it as a way to increase their profits. However, this activity does not increase societal gain and can have negative effects on the economy as a whole.

A Firm Engaging in Rent Seeking Activity