If a quota license is awarded to a domestic firm without an auction, it may generate bribes or lobbying spending to earn this revenue. Economists call this a(n) ____ activity.
A) efficient
B) unnecessary
C) wasteful rent-seeking
D) profit-maximizing

Question

Quizplus · Accepted Answer

Rent-seeking refers to the activities firms or individuals engage in to obtain economic rent (i.e., profit) through the manipulation of the economic or political environment, rather than through productive activities. In this case, a quota license being awarded without an auction may create incentives for firms to engage in rent-seeking activities, such as bribing or lobbying, to secure the license rather than competing in a fair market. These activities are considered wasteful since they do not contribute to economic growth or social welfare.

If a Quota License Is Awarded to a Domestic Firm