With rent seeking by a monopoly
A) the monopolist's average total costs will increase so that its average total cost curve is tangent to the demand curve at the profit-maximizing price.
B) a monopoly uses all of what would be its economic profit to prevent other firms from taking its economic rent.
C) the full deadweight loss of monopoly is larger than in the absence of rent seeking.
D) All of the above answers are correct.

Question

Quizplus · Accepted Answer

Rent-seeking behavior by a monopolist involves using its market power to prevent other firms from entering the market and competing away its economic rent. This behavior can take various forms, such as lobbying for regulations that restrict competition or engaging in predatory pricing to deter potential entrants.The correct answer is D because all of the statements are true. Rent-seeking by a monopoly can lead to higher average total costs for the monopolist, as it may incur expenses related to lobbying or other rent-seeking activities. Additionally, a monopoly may use some of its economic profit to engage in rent-seeking, reducing the amount of profit it would otherwise earn. Finally, rent-seeking can increase the deadweight loss of monopoly, as it can lead to a reduction in output and higher prices for consumers.

With Rent Seeking by a Monopoly