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Microeconomics

13th Edition
Roger A. Arnold
ISBN: 9781337617406

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BuyFindarrow_forward

Microeconomics

13th Edition
Roger A. Arnold
ISBN: 9781337617406
Textbook Problem

What are the social consequences of firms competing for artificial rents, as opposed to competing for real rents (in an environment in which there are no barriers to competing for real rents)?

To determine

The artificial rents and the real rents.

Explanation

Economic rent is a return over and above the opportunity cost. There are mainly two types of economic rent, namely artificial rents and real rents. An artificial rent is adapted by the government. This means that the existence of an artificial economic rent depends on the government. For example, a government’s support to the monopoly firm indicates that it legally bans all other firms to compete against the monopoly firm. As a result, the firms that compete against the monopoly firm spend their resources in a generally wasteful manner...

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