Question 2. Suppose the MLB is a monopsonist buyer of baseball players, and faces a supply...

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Question 2. Suppose the MLB is a monopsonist buyer of baseball players, and faces a supply curve described by the equation ws MC = 20Ls with marginal expenditure curve ME = 40Ls. Suppose the MLBPA is a monopolist producer of baseball players, and faces a demand curve described by the equation WD = MB = 1,200 - 20LD with marginal revenue curve MR = 1,200 - 40LD. = a) What is the equilibrium amount of labor demanded by the MLB and supplied by the MLBPA? (Hint: Set MR = MC or MB = ME and solve for L.) b) What is the contract zone for wages? (Hint: Plug L from part (a) into the demand equation to get the highest wage the MLB would be willing to offer, and plug L from part (a) into the supply equation to get the lowest wage the MLBPA would be willing to accept.) Question 2. Suppose the MLB is a monopsonist buyer of baseball players, and faces a supply curve described by the equation ws MC = 20Ls with marginal expenditure curve ME = 40Ls. Suppose the MLBPA is a monopolist producer of baseball players, and faces a demand curve described by the equation WD = MB = 1,200 - 20LD with marginal revenue curve MR = 1,200 - 40LD. = a) What is the equilibrium amount of labor demanded by the MLB and supplied by the MLBPA? (Hint: Set MR = MC or MB = ME and solve for L.) b) What is the contract zone for wages? (Hint: Plug L from part (a) into the demand equation to get the highest wage the MLB would be willing to offer, and plug L from part (a) into the supply equation to get the lowest wage the MLBPA would be willing to accept.)

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Solving for Equilibrium and Contract Zone in the MLB Labor Market We can analyze the MLB labor marke... View the full answer