Question

A reserve clause binds a professional athlete to a sports franchise even if the player does not have a contract with the team that retains the rights to the player. In other words, the player can only play for a single team and other teams may not bid for the player's services even in the absence of a contract. Major League Baseball was forced to outlaw reserve clauses in 1975. As a result of the ban, we would expect that

Select one:

A. minor league players would be paid more.

B. major league teams would have less incentive to train minor league players.

C. players in the major leagues would be paid less than their marginal product.

D. players in the major leagues would be paid more than their marginal product.

Answer 1

Answer - Option D

Players in major leagues would be paid more than their marginal product.

This is because when the reserve clause will be removed , other teams will be able to bid for the players which will lead to rise in pay which players receive. They will receive less if the reserve clause continues. Hence Option D will be correct