Answer to Question #242020 in Macroeconomics for Mnb

Question

One of the most important tasks of a government bureaucracy is to subcontract, by tender, the provision of goods and services. This intervention can give rise to rent-seeking corruption. Explain and graphically illustrate how rent seeking can undermine the efficiency in the economy

Answer 1

Rent seeking usually disrupt the can efficiencies of a market as they bring up pricing challenges for the market participants. This usually results to high entry barriers and limited competition.