When Resources Are Allocated Politically, Rent-Seeking Will

question 90

Multiple Choice

When resources are allocated politically, rent-seeking will

• A) channel resources toward government programs that generate large benefits relative to costs.
• B) reduce GDP because it results in the wasteful use of resources.
• C) lead to wasteful, rather than productive, use of resources.
• D) improve the efficiency of resource use.

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Definitions:

Net Present Value

Net present value (NPV) is the calculation used to find today’s value of a future stream of payments and earnings, accounting for the time value of money.

Cost of Capital

The return rate that a company must achieve in order to compensate its investors for the risk of the investment, including the cost of equity and debt.

Industrial Furnace

A device used in manufacturing to provide high temperatures for processes such as melting metals or chemical reactions.

Real Option

The right, but not the obligation, to undertake certain business initiatives, such as deferring, abandoning, expanding, staging, or contracting a project.