Which of the following is the best example of rent seeking?

• A. A firm increasing its output to lower average costs.
• B. Consumers paying lower prices due to competition.
• C. Politicians competing to win an elected position.
• D. A company investing in research and development.

Answer: (C)

Rent seeking means trying to gain a larger share of existing wealth by shaping government policy or regulation, rather than by creating new goods or services. When politicians compete to win an elected position, they are striving to obtain influence over policy that can create economic rents for themselves or their supporters—such as favorable regulations, subsidies, tariffs, or licenses—without adding real value. This focus on extracting or securing benefit through political power fits the idea of rent seeking, because the payoff comes from the policy environment, not from productive activities. The other scenarios involve producing more efficiently, benefiting from competition in markets, or investing in new ideas—activities that create or allocate wealth rather than capture special advantages from the political system. So, the best example is the pursuit of political power to shape policy in ways that could generate rents.