Microeconomics
13th Edition
ISBN: 9781337617406
Author: Roger A. Arnold
Publisher: Cengage Learning
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Question
Chapter 5, Problem 11QP
To determine
Choice of college athletes.
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Is there an economic justification to pay the baseball player Alex Rodriguez $25 million a year? The quarterback Peyton Manning makes $14 million per year. Has this market gotten completely out of hand? Can there be any justification to some of the salaries paid? If so, what are the justifications? What impact do these salaries have on the sport? Are there good economic reasons for teams to pay these salaries?
describe how the firms sets an efficiency wage above the competitive level. Why are there no market forces forcing the profit-maximizing firm to reduce the wage to the competitive level?
Suppose that the competitive wage in independent hockey league is $100,000 per season. One team owner has a taste for discrimination against all foreign players. Her coefficient of discrimination against European players is 0.15, and her coefficient of discrimination against Canadian players is 0.30.
a) If she pays them the market salary, what salary she feels she is paying to each group?
b) Given her preferences, what salary she will consider to be “fair” for each group?
c) If the supply of players were perfectly elastic, what would happen to the representation of European, Canadian, and US-born players on the team?
d) Who is going to be better and who is going to be worse off in this situation? Out of: the team owner, other teams owners, European players, Canadian players, US-born players, fans.
Chapter 5 Solutions
Microeconomics
Ch. 5.1 - Prob. 1STCh. 5.1 - Prob. 2STCh. 5.2 - Prob. 1STCh. 5.2 - Prob. 2STCh. 5.3 - Suppose college students are given two options....Ch. 5.3 - Prob. 2STCh. 5.4 - Prob. 1STCh. 5.4 - Prob. 2STCh. 5.5 - Prob. 1STCh. 5.5 - Prob. 2ST
Ch. 5.6 - Give an example to illustrate that someone may pay...Ch. 5.6 - Prob. 2STCh. 5.7 - Prob. 1STCh. 5.7 - Prob. 2STCh. 5.8 - Prob. 1STCh. 5.8 - Prob. 2STCh. 5.9 - Prob. 1STCh. 5.9 - Prob. 2STCh. 5.10 - Prob. 1STCh. 5.10 - Prob. 2STCh. 5.11 - Prob. 1STCh. 5.11 - Prob. 2STCh. 5.12 - Prob. 1STCh. 5.12 - Prob. 2STCh. 5 - Prob. 1QPCh. 5 - Prob. 2QPCh. 5 - Prob. 3QPCh. 5 - Prob. 4QPCh. 5 - Prob. 5QPCh. 5 - Prob. 6QPCh. 5 - Prob. 7QPCh. 5 - Prob. 8QPCh. 5 - Prob. 9QPCh. 5 - Prob. 10QPCh. 5 - Prob. 11QPCh. 5 - Prob. 12QPCh. 5 - Prob. 13QPCh. 5 - Prob. 14QPCh. 5 - Prob. 15QPCh. 5 - Prob. 16QPCh. 5 - Prob. 1WNGCh. 5 - Prob. 2WNGCh. 5 - Prob. 3WNGCh. 5 - Prob. 4WNGCh. 5 - Prob. 5WNGCh. 5 - Prob. 6WNG
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- If the competition in the market increases: A) The price setting curve shifts downward B) The wage setting curve shifts upward C) The wage setting curve shifts downward D) The price setting curve shifts upwardarrow_forwardWhat economic principle justifies the high salaries of some professional athletes? Suppose the manager of a baseball team wants to hire a new pitcher for $4 million per year. Under what circumstances would it make sense for the team to do so? Assume that the government of the state of New Jersey has determined that a large number of injuries and deaths have occurred as a result of accidents involving the installation and repairs of electrical equipment at private residences. In reaction to this problem the state assembly decides to pass a law which requires that all certified electricians pass a tougher state licensing examination. Analyze the impact that this law is likely to have on the market for electricians and explain why safety may not necessarily improve. If the market price of the good or service that a firm produces increases, what happen to the demand of labor? Explain. Several cities across the United States have passed legislation to raise the living wage. How would this…arrow_forwardSuppose that there is an excess supply of economics professors. Should universities necessarily reduce salaries? What does standard economic theory suggest? What does efficiency-wage theory suggest (Explain with diagram)arrow_forward
- The demand for NHL players can be written as: Qd=300-W , where Qd - number of players demanded by the league, W - wage of the player (you can think about it as of price). Marginal revenue: MR=300-2Q The supply of players: Qs=W, where Qs - number of players willing to play. ME=2Q . a) Imagine that both sides of the market are perfectly competitive. What is the equilibrium number of players in the league and what is the equilibrium wage? Show it on a graph. b) Imagine that players are represented by a union (monopoly), and the NHL teams compete for the players. What is the equilibrium number of players (Qu) and equilibrium wage (Wu) in this case? Show it on a graph. c) Imagine that NHL makes all the decision as a single entity (monopsony), and the players are not unionized. What is the equilibrium number of players (QNHL) and equilibrium wage (WNHL) in this case? Show it on a graph. d) What is going to be the equilibrium number of players in the league and what is the…arrow_forwardAssume that the supply of electrical technicians is low so a firm hires a group of them at $18 per hour. Two years later, due to a recession, the supply of technicians is high so the market rate for them is now $15 per hour. Should the firm pay new hires $18 or $15? Given that the firm bases pay on supply and demand, should it lower the pay of existing mechanics to $15arrow_forwardFrom California to New York, legislative bodies across the United States are considering eliminating or reducing the surcharges that banks impose on non customers, who make $14 million in withdrawals from other banks' ATM machines. On average, non customers earn a wage of $24 per hour and pay ATM fees of $3.00 per transaction. It is estimated that banks would be willing to maintain services for 6 million transactions at $1.00 per transaction, while non customers would attempt to conduct 22 million transactions at that price. Estimates suggest that, for every 1 million gap between the desired and available transactions, a typical customer will have to spend an extra minute traveling to another machine to withdraw cash. What would be the nonpecuniary cost of legislation that would place a $1.00 cap on the fees banks can charge for non customer transactions? Economic price?arrow_forward
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