Economists have long been fascinated by the diamond-water paradox. The question raised by this paradox is why water, a substance needed to sustain human life, is generally worth less than diamonds, a product that adds no real value to mankind.
This same question could be posed about professional athletes’ salaries. How can athletes’ salaries be so high when salaries for other occupations (such as teachers, firefighters, etc), that are clearly more important, are so much lower?
Read the following materials:
Chass, M. (2002). Scoring the Big Money. Retrieved on May 17, 2010 from: http://findarticles.com/p/articles/mi_m0BUE/is_1_135/ai_n18614876/
Lesson 3: The Economics of Pro Athlete Salaries and Ticket Prices. Center for Economic Education. University of Wisconsin-Parkside. Retrieved on May 17, 2010 from: http://www.uwp.edu/departments/economics/cee/teaching_resources/lesson03.html
McLaughlin, D (2007). Rich Athletes, Poor Teachers. Ludwig Von Mises Institute. Retrieved on May 17, 2010 from: http://mises.org/story/2626
Now, write a 3-5 page paper thats addresses the following questions:
1. Why do professional athletes make so much money? Be sure to explain the diamond-water paradox and how it relates to athletes’ salaries.
2. A persons wage is related to his/her worth to the firm. Use the background information and do some research on your own. Compare the marginal revenue product of a teacher to a professional athlete. Why is it different? Be sure to read the marginal productivity presentation on this topic prepared by the instructor.
3. Why would firms stop hiring workers when the wage is above the marginal revenue product?
4. Is it true or false that high player salaries are the reason that pro ticket prices are so high? Explain by using economic concepts from the current and previous modules.
Case Assignment Expectations:
Use concepts from the modular background readings as well as any good quality resources you can find from the cyberlibrary or other internet search engines. Pleas be sure to cite all sources within the text and provide a reference list at the end of the paper.
Length: 4-5 pages double spaced and typed.
The following items will be assessed in particular:
Your ability to understand marginal productivity and how firms make decisions.
Some in-text references to the modular background material (APA formatting not required).
The essay should address each element of the assignment. Remember to support your answers with solid references including the case readings.