Final answer:
The elasticity of supply measures how responsive the quantity supplied is to changes in price. In this case, the elasticity of supply of MLB players before free agency was calculated to be 0, indicating a perfectly inelastic supply.
Step-by-step explanation:
The elasticity of supply measures how responsive the quantity supplied is to changes in price or other factors. In this case, Scully found that the salaries paid in MLB before free agency were about 20 percent of a player's MRP. We can use this information to calculate the elasticity of supply using the formula: Elasticity of supply = (% change in quantity supplied) / (% change in price).
Since we know that the salaries paid were about 20 percent of the player's MRP, we can assume that the price of players increased by 20 percent after free agency. Therefore, the change in price is 20 percent. If we assume that the quantity supplied remained the same, the change in quantity supplied is 0 percent. Plugging these numbers into the formula, we get: Elasticity of supply = 0 / 20 = 0.
Thus, the elasticity of supply of those players is 0, indicating a perfectly inelastic supply. This means that the quantity supplied did not change at all in response to the increase in price.