Ticket prices for professional team sports are high because the team owners just pass the costs of the athletes' high salaries on to ticket buyers. Is this statement generally correct or incorrect? Why?
1) Correct. High sports salaries contain 'economic rent' and economic rent normally gets passed on to consumers.
2) Correct. High sports salaries force owners to charge high ticket prices, which they can pass on to consumers because demand is elastic.
3) Incorrect. High sports salaries contain 'economic rent' and would not be so high if the public were unwilling to buy tickets at the high prices.
4) Incorrect. Owners can afford to pay the high salaries without raising ticket prices. They raise prices simply to increase their marginal revenue above their marginal cost.