Chapter 16, Problem 8P

To determine

the ways in which the rent seeking can result in fall in the production of goods and services and the role played by the underground economy in reducing the fall in productive activities.

Concept Introduction:

Rent seeking is a type of resource or capital earning system by a company, organization or individual to obtain economic gain without reciprocating any benefits to society and creating wealth. This involves an earning income through profit, wage and rent. Rent is considered the least risky and easiest type of earning income because it requires resource ownership and the ability to use these resources to generate income by lending their use to others. It can be problematic when the company increases the no. of shares without increasing the total capital.