In August 1988, the Los Angeles Kings hired Wayne Gretzky for $15 million in cash.The hockey team's decision must have been based on the expectation that
A)Gretzky's opportunity cost will exceed $15 million.
B)Gretzky's marginal revenue product will equal or exceed $15 million.
C)the team's total revenue will equal $15 million.
D)Gretzky's marginal revenue product will rise in the long run.

Question

Quizplus · Accepted Answer

The decision to hire Wayne Gretzky for $15 million was likely based on the expectation that his marginal revenue product (MRP) would be equal to or exceed $15 million. MRP is the additional revenue generated by the addition of one more unit of a factor of production, in this case, Gretzky's talent and skills on the ice. The Kings likely believed that Gretzky's presence would increase ticket sales, merchandise sales, and overall revenue for the team. If his MRP was less than $15 million, the team would have been better off spending their money elsewhere.

In August 1988, the Los Angeles Kings Hired Wayne Gretzky