If a monopoly engages in rent seeking,
i.its average total cost curve is lower than otherwise.
ii.it might or might not make an economic profit depending on how many other competitors also are rent seeking.
iii.it necessarily incurs an economic loss.
A) i only
B) ii only
C) iii only
D) i and ii
E) i and iii

Question

Quizplus · Accepted Answer

Rent seeking behavior can lead to an increase in the monopolist's cost, leading to a reduction in the economic profit. Therefore, it is possible that a monopolist engaged in rent seeking behavior might or might not make economic profits depending on how many other competitors are also rent seeking. However, it does not necessarily lead to an economic loss (iii), and there is no reason to assume that the average total cost curve would be lower (i).

If a Monopoly Engages in Rent Seeking