Which of the following statements best defines the economics of the so-called su

Question

Which of the following statements best defines the economics of the so-called superstar effect in the labor market? a. This effect occurs in cases in which individuals with small productivity differences receive very small differences in compensation. b. This effect usually occurs in industries in which a labor union has far-reaching powers. c. This effect occurs in cases in which individuals with small productivity differences receive vastly different compensation. d. This effect will result in cases in which individuals with large productivity differences receive vastly different compensation. e. This effect occurs when the firm hiring the superstar simply does not understand the term marginal-revenue product.

Explanation / Answer

c. This effect occurs in cases in which individuals with small productivity differences receive vastly different compensation.

Celebrities like actors, singers, sportsmen earn way higher wages than people in other professions. This leads to large disparity in income. This is known as superstar effect in labor market.

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