Stephen Strasburg's marginal product as a baseball player would be about the same as a Washington National and a Kansas City Royal. Why would a team in a larger city such as Washington, D.C. be willing to pay a star player such as Stephen Strasburg more than a team in a smaller city such as Kansas City?
A) Teams in larger cities need superstars to attract fans to their games. Teams in smaller cities have no need to attract fans to their games.
B) Major League Baseball teams in larger cities play more home games than Major League Baseball teams in smaller cities. As a result, teams in larger cities earn more revenue from ticket sales that they can use to pay player salaries.
C) A star player such as Strasburg's marginal revenue product is higher for a team in a larger city than it would be for a team in a smaller city.
D) The owners of teams in larger cities are under more pressure from the fans and the local media to pay star players higher salaries than the owners of teams in smaller cities are willing to pay.
Correct Answer:
Verified