(Consider This) In the market for superstars,
A) earnings reflect pricing power rather than marginal revenue product.
B) small differences in talent get magnified into huge differences in pay.
C) entry and exit rarely occur.
D) product demand is typically highly elastic.

Question

Quizplus · Accepted Answer

In the market for superstars, small differences in talent get magnified into huge differences in pay. This is known as the "winner-take-all" phenomenon, where a relatively small difference in talent translates into a large difference in earnings. For example, the highest-paid actors in Hollywood earn significantly more than their peers, despite differences in talent that may be relatively small. This is because the demand for talent is extremely high, and there is a limited supply of individuals who possess that talent. As a result, those who possess the most talent can command extremely high salaries.

(Consider This) in the Market for Superstars