Question

The marginal cost (MC) of admitting an additional fan to watch the Golden State Warriors play basketball is close to zero, but the average price (P) of a ticket to a Warriors game is about $160. What do this information tell you about the market in which the Warriors operate?

A. The Warriors must have some degree of monopoly power since under perfect competition firms set P=MC while the Warriors set P>MC.
B. The Warriors must have a lot of competition because they have set the P>MC.
C. The Warriors must have some degree of monopoly power since under perfect competition firms set PMC.
D. The degree of competition or lack thereof cannot be determined with the information provided.

Answer 1

The Golden State Warriors operate in a market with some degree of monopoly power because they set the average price higher than their marginal cost.

Step-by-step explanation:

The information provided indicates that the Golden State Warriors operate in a market with some degree of monopoly power, as they set the average price of tickets to be higher than their marginal cost. In a perfectly competitive market, firms set the average price equal to the marginal cost. Since the Warriors' average price is higher than their marginal cost, it suggests that they have some market power and are able to charge a higher price.