In the United States, major league baseball is exempt from antitrust laws. Before 1975, the baseball team owners agreed to hold an annual draft of amateur baseball players. Once the players were drafted and signed by a team, they were effectively tied to that team for life. This allowed baseball owners to operate like ________ in the market for player services.
A) perfect competitors
B) monopolistic competitors
C) a monopsonistic cartel
D) a monopoly

Question

Quizplus · Accepted Answer

A monopsonistic cartel is a group of employers that act as a monopsony, or a single buyer of a good or service (in this case, the services of baseball players). By agreeing to hold an annual draft and limiting the ability of players to move between teams, the baseball team owners effectively reduced competition for player services and were able to keep player salaries lower than they might have been in a more competitive market. This is an example of a monopsonistic cartel, which is only possible in markets where there are high barriers to entry and limited competition.

In the United States, Major League Baseball Is Exempt from Antitrust