In the 2006 MLB baseball season, the Chicago Cubs finished last in their division, although they maintained robust attendance at games. Before the 2007 season, the Chicago Cubs spent a lot of money on free agents. For example, they spent $136 million of ran eight year deal with left fielder Alfonso Soriano, $21 million for a three year deal with starting pitcher Jason Marquis, and $40 million for a four year deal with another pitcher, Ted Lilly. As a result, the annual payroll went up by $29 to $30 million. Because player salaries are a fixed cost, tic ket prices should not have risen as a result of the increased payroll, yet ticket prices did rise! What happened here? Illustrate (using graphs) and explain.

In the 2006 MLB baseball season, the Chicago Cubs finished last in their division, although they maintained robust attendance at games. Before the 2007 season, the Chicago Cubs spent a lot of money on free agents. For example, they spent $136 million of ran eight year deal with left fielder Alfonso Soriano, $21 million for a three year deal with starting pitcher Jason Marquis, and $40 million for a four year deal with another pitcher, Ted Lilly. As a result, the annual payroll went up by $29 to $30 million. Because player salaries are a fixed cost, tic ket prices should not have risen as a result of the increased payroll, yet ticket prices did rise! What happened here? Illustrate (using graphs) and explain.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter10: Cost Functions

Section: Chapter Questions

Problem 10.12P

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