Rent seeking behavior can affect economic growth because
A) it stimulates innovation
B) it allows arbitrageurs to capture profits that would otherwise go unrealized
C) it reduces the level of risk in the economy
D) it provides an efficient use of land
E) it shift labor away from entrepreneurial activity

Question

Quizplus · Accepted Answer

Rent seeking behavior refers to individuals or firms seeking to increase their income or profits through activities that do not create any value for society. This can include lobbying for government favors, monopolizing markets, or other activities that essentially transfer wealth from others rather than creating new wealth. When resources are diverted towards rent-seeking activities rather than productive activities, it can reduce economic growth by reducing investment in productive industries and shifting labor away from entrepreneurial activity. Therefore, Choice E is the best answer.

Rent Seeking Behavior Can Affect Economic Growth Because