Which of the following explains why talented major league baseball players command much higher salaries than neurosurgeons?
A) because it takes far more skill and training to be a major league baseball player than to be a neurosurgeon
B) because the supply of talented major league baseball players is low relative to its demand compared to the supply of neurosurgeons. Therefore, adding another player yields far greater marginal benefit than adding another neurosurgeon.
C) because the total value of baseball games is much higher than the total value of neurosurgery
D) because the supply of talented major league baseball players is relatively low compared to the supply of neurosurgeons. Therefore, major league baseball players exert far more market power than neurosurgeons.
B
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If marginal cost is zero a firm can still profit through pricing
Indicate whether the statement is true or false
You are the mayor of your home town, and one day you arrive at city hall to find angry voters demonstrating against you. They are mad because your office created a garbage-collection monopoly by awarding only one company a permit to collect garbage in
your town. The voters claim that the company is overcharging and providing poor service. They want you to do something that will lower rates and improve service. You call your staff economist, who presents evidence that there are substantial increasing economies of scale to garbage collection. What are your options if you are interested in efficiency?