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19 May, 14:41

Economic studies have generally found that professional sports players have salaries that

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  1. 19 May, 16:49
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    should be equal to their marginal revenue product.

    Explanation:

    This applies to basically all employees that work in competitive markets, their salaries should equal their marginal revenue product.

    An employee's salary = the market value of hiring the employee = marginal revenue product

    The formula for calculating marginal revenue product = marginal physical product x marginal revenue

    where:

    marginal physical product = extra units produced by the employee marginal revenue = price of the units produced

    For example, a new employee can produce 100 units per day and each unit is sold at $0.75, therefore the employee's marginal revenue product = 100 units x $0.75 per unit = $75 per day
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