Explain what rent seeking is and how it may reduce the benefits of industrial policies
What will be an ideal response?
Rent seeking is any activity by firms, individuals, or special interests that is designed to alter the distribution of income in their favor without adding to the amount of total income in the economy. If firms know that governments are willing to use industrial policies, they will spend resources to obtain some of the subsidies. This may require the hiring of lobbyists, economists, or engineers who will work to persuade the legislature or some other rule makers. The downside is that it uses resources but does not add to total output.
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In the figure above, with international trade American consumers buy ________ million shirts per year
A) 48 B) 32 C) 16 D) 24
Suppose coal sells for $50 per ton and can be mined at a constant marginal cost of $20 per ton. Forecasters predict that the price of coal next year will be $55
If your marginal cost next year will still be $20 and the interest rate is 10%, do you sell coal today?