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Chapter 5: Q6. (page 114)

Tammy Hall is the mayor of a large US city. She has just established the Office of Window Safety. Because windows sometimes break and spray glass shards, every window in the city will now have to pass an annual safety inspection. Property owners must pay the $5-per-window inspection cost鈥攁nd by the way, Tammy has made her nephew the new head of the Office of Window Safety. This new policy is an example of _______.

a. political corruption

b. earmarks

c. rent-seeking

d. adverse selection

Short Answer

Expert verified

Option C: rent-seeking.

Step by step solution

01

Explanation for the correct option

Rent-seeking refers to how various corporations, unions, organizations, and others gain extra profits by politically influencing the government and its policies. These rents are dispensed using various laws, hiring, or purchasing rules.

Since the mayor of the large US city has put an additional requirement which increases the cost by $5-per-window over and above the minimum cost for property owners, this comes under rent-seeking. This cost is unnecessary as the windows would have been working the same as before with no additional charges.

Thus, $5 per window is economic rent.

02

Explanation for incorrect options

Political corruption is when government officials abuse their powers and government resources for personal gain.This is illegal and can not be directed through laws or rules. The establishment of an 鈥極ffice of Window鈥� safety is a legal entity, and thus, this does not come under political corruption.

The following two do not relate to the problem given in the question. This can be understood by the definitions.

  • Earmarking refers to setting aside a certain amount of money to fund an organization's specific purpose or goal.
  • Adverse selection refers to choosing a bad option/policy or rule due to a lack of information on the buyer side.

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Most popular questions from this chapter

Consider a specific example of the special-interest effect and the collective-action problem. In 2012, it was estimated that the total value of all corn-production subsidies in the United States was about \(3 billion. The population of the United States was approximately 300 million people that year.

a. On average, how much did corn subsidies cost per person in the United States in 2012? (Hint: A billion is a 1 followed by nine zeros. A million is a 1 followed by six zeros.)

b. If each person in the United States is willing to spend only \)0.50 to support efforts to overturn the corn subsidy, and if anti-subsidy advocates can only raise funds from 10 percent of the population, how much money will they be able to raise for their lobbying efforts?

c. If the recipients of corn subsidies donate just 1 percent of the total amount that they receive in subsidies, how much could they raise to support lobbying efforts to continue the corn subsidy?

d. By how many dollars does the amount raised by the recipients of the corn subsidy exceed the amount raised by the opponents of the corn subsidy?

Look back at Figures 5.2a and 5.2b, which show the costs and benefits to voters Garcia, Johnson, and Lee of two different public goods that the government will produce if a majority of voters support them. Suppose that Garcia, Johnson, and Lee have decided to have one single vote at which the funding for both of those public goods will be decided simultaneously.

a. Given the $300 cost per person of each public good, what are Garcia鈥檚 net benefits for each public good individually and for the two combined? Will she vote yes or no on the proposal to fund both projects simultaneously?

b. What are Lee鈥檚 net benefits for each public good individually and for the two combined? Will she vote yes or no on the proposal to fund both projects simultaneously?

c. What are Johnson鈥檚 net benefits for each public good individually and for the two combined? Will he vote yes or no on the proposal to fund both projects simultaneously鈥攐r will he be indifferent?

d. Who is the median voter here? Whom will the two other voters be attempting to persuade?

What are the two characteristics of public goods? Explain the significance of each for public provision as opposed to private provision. What is the free-rider problem as it relates to public goods? Is US border patrol a public good or a private good? Why? What type of good is a satellite TV? Explain.

True or False: The median-voter model explains why politicians so often stake out fringe positions that appeal only to a small segment of the electorate.

What is rent-seeking, and how does it differ from the kinds of profit maximization and profit-seeking that we discussed in previous chapters? Provide an actual or hypothetical example of rent seeking by firms in an industry, by a union, or by a professional association (for example, physicians, school teachers, or lawyers). Why do elected officials often accommodate rent-seeking behavior, particularly by special-interest groups located in their home states?
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