Rent seeking is a defect of monopoly because it leads to which outcome?

• A. Increased competition
• B. Lower consumer prices
• C. Wasted resources and reduced welfare
• D. Rent seeking

Answer: (C)

Rent seeking is a behavior where a firm spends resources to obtain favorable regulation or to protect its monopoly profits rather than to produce goods efficiently. In a monopoly, these efforts divert resources away from productive activities, so not only is output limited, but the monopoly price remains above marginal cost. That creates a deadweight loss and reduces overall welfare for society. It doesn’t lead to more competition or lower prices; it preserves market power and raises costs and prices. The outcome is wasted resources and reduced welfare.