ECON 2P03 Study Guide - Deadweight Loss, Price Discrimination, Economic Surplus
13 Mar 2014
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Founded in 1876 (oldest league in the us), mlb"s national league (nl) had 2 basic principles: clubs had the exclusive right to their home territory. This gave teams monopoly power in their host cities: a reserve system where players were bound to their club as long as the club wanted them. This gave teams monopsony power over its players. Eliminating competition may be good for the teams, but it"s not good for consumers. Fewer teams in fewer cities results in fewer games and higher prices for fans. If sports were a competitive industry, there would be more teams and lower ticket prices. A competitive firm produces output where p = mr = mc and charges p = mc. A monopoly produces output where mr = mc and charges p > mc. A consumer"s willingness-to-pay minus what they actually pay. What a firm receives minus what they are willing to take. Qmeqc is surplus no one gets it"s the deadweight loss.
