Depict the following scenario using a graph. Assume that Major League Baseball goes from having free agency in their labor market to re-instituting the reserve clause, now giving teams monopsony power in the labor market. a. Identify on a graph the wage of a player when there was only free agency, and identify the wage following the reserve clause being reinstated. Additionally, identify where the producer and consumer surplus is in the market on the graph. b. Suppose instead that MLB does NOT have any monopsony power, however, the players are able to form a powerful union. Depict how the union would change the equilibrium wages accepted by players.
Depict the following scenario using a graph. Assume that Major League Baseball goes from having free agency in their labor market to re-instituting the reserve clause, now giving teams monopsony power in the labor market. a. Identify on a graph the wage of a player when there was only free agency, and identify the wage following the reserve clause being reinstated. Additionally, identify where the producer and consumer surplus is in the market on the graph. b. Suppose instead that MLB does NOT have any monopsony power, however, the players are able to form a powerful union. Depict how the union would change the equilibrium wages accepted by players.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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5Depict the following scenario using a graph. Assume that Major League Baseball goes from having free agency in
their labor market to re-instituting the reserve clause, now giving teams monopsony power in
the labor market.
a. Identify on a graph the wage of a player when there was only free agency, and identify
the wage following the reserve clause being reinstated. Additionally, identify where the
producer and consumer surplus is in the market on the graph.
b. Suppose instead that MLB does NOT have any monopsony power, however, the players
are able to form a powerful union. Depict how the union would change the equilibrium
wages accepted by players.
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