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100 Cards in this Set

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1. According to the principle of comparative advantage Charles Woodson plays defensive back
rather than receiver for the Green Bay Packers because
b. his advantage as a defensive back exceeds his advantage as a receiver.
2. Tom holds the world speed record in typing. Comparative advantage leads you to expect:
b. Tom may hire another person to do his typing
Use to answer Q3-Q4: Suppose the market demand for tickets to a University of Tennessee
basketball game is Q^d= 40,000 - 1000p and the supply is Q^S
= 20,000.
3. What is the equilibrium price of a ticket to the game?
d. 20
Use to answer Q3-Q4: Suppose the market demand for tickets to a University of Tennessee
basketball game is Q^d= 40,000 - 1000p and the supply is Q^S
= 20,000.
4. What would happen to the market for tickets if the university set a price ceiling on tickets of
$10 and if Tennessee had strict anti-scalping laws?
d. A shortage of 10,000.
5. The New York Jets football team raises ticket prices from $100 to $110 per seat and experience
a 5 percent decline in tickets sold. What is the elasticity of demand for tickets?
b. -0.5
6. Since the 1990s, many Major League Baseball teams have moved to new stadiums that are far
smaller than the ones they have replaced. What has this has meant for ticket prices?
a. Higher.
7. Suppose the Tampa Bay Rays baseball team charges $10 bleacher seats (poor seats in the
outfield) and sells 250,000 of them over the course of the season. The next season, the Rays
increase the price to $12 and sell 200,000 tickets. What is the elasticity of demand for bleacher
seats at Rays games?
a. -1.0.
8. Continuing from previous question, assuming the marginal cost of admitting one more fan is
zero, is the price increase a good idea?
a. No, revenues are lower after price increase.
9. The fact that attendance rises at baseball stadiums during “bobblehead” days suggests
a. baseball games and bobbleheads are complements.
10. Professional sports first arose in England and the United States because
b. the Industrial Revolution increased the productivity of workers there.
11. If the Celtics sign Kevin Garnett to a big contract they may raise ticket prices because
b. their demand curve shifts right.
12. Why are season tickets cheaper than tickets for the same number of games when they are purchased individually?
b. Because the season ticket transfers risk from team to fan.
13. A price ceiling on tickets creates
a. excess demand, which creates gray and black markets.
14. If the Detroit Pistons raise their ticket prices and see ticket revenues fall (holding all else equal),
we can conclude that
d. the demand for tickets is price elastic.
Given the following regression equation with t-statistics in parentheses:
Salary = 566,400 + 71,928 Goals + 20,403 Assists +98,430 All-Star
(3.45) (2.96) (3.5) (1.30)
R
2
= 0.95
Salary = NHL Salary in $
Goals = Number of career goals
Assists = Number of career assists
All-Star = 1 if All-Star in the previous season, 0 otherwise.
15. Interpret the value for R
2
.
a. 95% of the variation in NHL Salary can be explained by Goals, Assists and All-Star.
b. 5% of the variation in NHL Salary is explained by other factors.
d. Both A and B.
16. In the regression above, is appearing in the All-Star game a statistically significant factor in
determining NHL Salary?
b. No, the t-statistic is less than 2, so the coefficient is not statistically different from zero.
17. The Law of Demand is that when price rises the quantity demanded falls. Why?
a. Because we substitute away from higher priced good to cheaper alternatives.
b. Because the increase in price lowers our real income and reduces our spending on all
(normal) goods.
e. Both a and b.
18. Suppose a monopoly team faces demand for a sporting event of Q = 100 − p. The associated
marginal revenue function is MR = 100 − 2Q. If marginal cost is zero, what are the optimal
quantity (of tickets) and price per ticket?
a. Q* = 50 and p* = 50
19. Continuing with the question above, if fixed costs are $500, what would the level of profit be?
b. 2000
Suppose that the demand curve for seats at a minor league baseball stadium in Trenton, N.J., is Q
d= 6,000 - 10p.
20. How many fans would attend if ticket were free?
c. 6000
21. At what price would no fans attend the game?
b. 600
22. If the building capacity (supply) is fixed at 4000, what price would maximize revenue while
ensuring a sellout?
b. 200
1. The Miami Dolphins are not like Blockbuster Video because
b. Blockbuster wants to drive its rivals out of business, and the Dolphins do not.
2. The Atlanta Braves and TNT are both owned by Time Warner. One reason the Atlanta Braves
do not maximize profit is because
a. they add to the profits of TNT.
3. By declaring Subchapter S status owners of professional teams can
c. use depreciation to reduce their personal taxes.
4. The American League succeeded as a rival league where other leagues—like the American Association of the 1880s and 1890s—failed because
d. the National League had restricted itself to too few cities.
5. The Kansas City Royals are a “small market” team while the Kansas City Chiefs are not because
d. they have to share more of their revenue with other teams.
6. Leagues evolved as the best way for teams to maximize profits because they
a. provided stability.
Suppose an owner pays $500 million to purchase a hockey team that earns operating profits of $50 million per year. The new owner claims that $200 million of this prices is for the players, which he can depreciate using straight-line depreciation in five years. If the team pays corporate profit taxes of 40 percent, how much does the depreciation of the players save the owner?
a. $16 million per year.
8. The Miami Marlins just traded away their best players to the Red Sox in order to cut team payroll and earn higher profits. From the list below, which team is least likely to pursue the Marlins strategy?
d. Arsenel FC
9. In the Promotion and Relegation system in the English Premiere League, the two worst teams in
the Premiere League are relegated to a lower league and the two best teams in the next division
are promoted to the Premiere League. This league structure:
b. reduces monopoly power for the team.
10. If a team restricts the food and beverages fans can bring into the stadium with them, a likely effect is?
b. High food and beverage prices in the stadium.
11. Suppose that the demand curve for tickets to see a football team is given by Q = 100,000 − 100p
and marginal cost is 0. If the team operates in a competitive market, what is the equilibrium
price per ticket?
c. $0
12. Suppose that the demand curve for tickets to see a football team is given by Q = 100,000 − 100p
and marginal cost is 0. If the team operates in a competitive market, what is the equilibrium number of tickets sold?
c. 100,000
13. Suppose that the demand curve for tickets to see a football team is given by Q = 100,000 − 100p
and marginal cost is 0. If the team operates as a monopolist, what is the equilibrium price per ticket?
a. $500
14. Suppose that the demand curve for tickets to see a football team is given by Q = 100,000 − 100p
and marginal cost is 0. If the team operates as a monopolist, what is the equilibrium number of
tickets sold?
a. 50,000
15. Baseball has not been convicted of violating the Sherman Antitrust Act because
d. baseball has been exempt from the Antitrust laws.
16. When Mark Lemke said that Greg Maddux “played to a hitter’s strength—just when he doesn’t expect it” he meant that Maddux
c. is following a mixed strategy
17. Most in-game decisions in baseball have a prisoner’s dilemma feature to them. For example,
Nolan Ryan has two pitches, fastball and curveball. His fastball is the better pitch but if he
throws it when the hitter is expecting it, the hitter will hit a home run. Rickey Henderson is a
good fastball hitter but has trouble hitting the curve. The payoff matrix for 3-2 pitch is as
follows:

Ryan\Rickey Fastball Curve

Fastball -2, 2 1, 0
Curve 1, 0 -1, 1

The first number in each box is Ryan’s payoff and the second is Henderson’s payoff. So if Nolan
throws a fastball and Rickey is expecting fastball (upper left cell) then Rickey hits a two-run homer.
If Nolan throws a fastball and Rickey is expecting a curve (lower left cell), Rickey strikes out. The
same is true if Rickey expects a fastball but Nolan throws the curve (upper right cell). Finally, when
Nolan throws the curve and Rickey is expecting the curve, he gets a base hit but no home run (lower
right cell). What pitch should Nolan make?
a. Curve.
18. The monopoly power that the NCAA held over TV networks fell apart due to
a. the prisoner’s dilemma
19. The NCAA arose in response to
a. increasing violence in college football
20. The antitrust exemption that Major League Baseball enjoys
c. is shared to a limited extent by the other professional sports
21. The true cost of monopoly power to society is attributable to
b. the reduction in output by the monopolist
22. In most professional sports leagues, over the course a single season, the largest proportion of team cost is
b. fixed
23. In the above graph what does DWL stand for?
b. dead weight loss
24. Suppose the typical Buffalo Bills fan has the following demand curve for Bills football games:
P = 120 − 10G where G is the number of games the fans attends. If the Bills want to sell the fan a ticket to all eight home games, what price must they charge?
c. $40
25. Suppose the typical Buffalo Bills fan has the following demand curve for Bills football games:
P = 120 − 10G where G is the number of games the fans attends. If the Bills price discriminate by selling different fans different season ticket packages, what would they charge for a four game mini-plan?
b. $95
1. Over the past 12 years in Patriot League Women’s Volleyball, American has won five titles, Colgate has
won three league titles, Bucknell has won two titles, and Lehigh and Army have each won one title. In
the NBA over the past 12 years, the L.A. Lakers, San Antonio Spurs, and Chicago Bulls have each won
three titles, the Houston Rockets, Detroit Pistons, and Miami Heat have each won one title. The HHI for
championships in Patriot League Volleyball and the NBA are
a. 2.5 (NBA) and 3.3 (PL).
2. Based on the information in Question 1, which league exhibits more competitive balance?
e. Because the leagues have a different number of teams and/or play a different number of games
each season, neither inter-season nor intra-season competitive balance can be determined from
the information given.
3. The standard deviation of win percentage for the 32 teams in the NBA in 2005–2006 was 0.134. The
NBA plays an 82 game season. The standard deviation of win percentage for the 20 teams in the English
Premier League in 2005–2006 was 0.158. The EPL plays a 38 game season. The idealized win
percentages for the NBA and EPL are
a. 0.055 (NBA) and 0.081 (EPL).
4. Based on the information in Question 3, which league exhibits more competitive balance?
b. The EPL exhibits more within-season competitive balance, but between-season competitive
balance cannot be determined from the information given.
5. Just before the 2007 Daytona 500, NASCAR heavily fined several racing teams for using fuel additives that make cars go slightly faster. Why would NASCAR want to take steps to lower the speed of their race cars?
c. NASCAR fans prefer relative quality over absolute quality.
6. Because of the rent gradient most stadiums are built
b. on the outskirts of town.
7. The winner’s curse suggests that
d. cities that attract a franchise typically pay too much.
8. New baseball stadiums are smaller than they used to be because
b. baseball teams no longer share ballparks with football teams.
9. The all-or-nothing demand curve allows
d. the IOC to overcharge host cities.
10. The Green Bay Packers could threaten to leave the city of Green Bay because
a. they are privately owned.
11. Walter O’Malley is infamous for
b. moving the Dodgers from Brooklyn to Los Angeles.
12. Teams can persuade host cities to build them new stadiums because
b. they can always threaten to re-locate the team.
13. Businesses like to locate in the center of town because
b. they can attract more customers.
14. Suppose the demand for toothbrushes is perfectly inelastic at Qd = 3,000. The market supply curve is perfectly elastic and is equal to p = 2.00. What would be the deadweight loss associated with a $0.20 tax on toothbrushes?
c. 0
15. If the marginal propensity to consume in a municipality is 0.8, what is the value of the simple multiplier?
c. 5
16. Assume that the MPC is 0.9. If a new stadium that adds $30 million in new expenditures is built, what is the impact on the economy based on this multiplier?
a. $300 million
17. Studies of the benefits of a team often overstate the multiplier because
b. they do not consider leakages into surrounding communities.
18. Why is the multiplier effect for the local economy likely to be greater for the Los Angeles Lakers than the Sacramento Kings even though both are NBA teams?
d. The Lakers’ players are much more likely to live the in the city in which they play than
Sacramento’s players.
19. A city may make sizable operating revenues from leasing a venue to a team but still subsidize its team because
c. the city ignores opportunity costs.
20. Most economists view tax revenues raised through state lotteries as
d. regressive since poor people spend a greater fraction of their income on tickets.
21. Logrolling can improve upon majority rule because
d. it allows for the intensity of desires.
22. Having the Dallas Cowboys play in Arlington may generate positive externalities, i.e. pride in the community, etc. When a good yields positive externalities the competitive equilibrium
b. results in too little of the good being produced, relative to the efficient outcome.
23. Having the Dallas Cowboys play in Arlington may generate negative externalities, i.e. noise, crime.
When a good yields negative externalities the competitive equilibrium
a. results in too much of the good being produced, relative to the efficient outcome.
24. When the production of a good generates a negative externality, the optimal government response is
b. Tax the output.
25. When the production of a good generates a positive externality, the optimal government response is
c. Subsidize the output.
1. Suppose that there are two types of players, good and medium. The team demand curve for top-quality players is Q = 27 − 5w, and the market supply of top players is Q = 4w, where w is the wage in millions of dollars how many top-quality players will the team hire?
b. 12
2. In the question above, what will be the equilibrium wage for good players?
c. $3 million
Players
Statistic Joe Bob Fred Jim
Points 17 25 10 20
Total rebounds 7 5 10 6
Steals 3 0 4 2
Blocks 2 2 0 0
Assists 3 4 6 8
Field goal attempts 18 28 8 13
Free throw attempts 10 9 4 5
Turnovers 2 3 2 4
Personal fouls 4 5 3 3
3. Based on the player statistics in the above table,compute the Wins Produced value for Bob.
b. -5
4. Assuming the players have equal star power to attract fans and players are rewarded only based on Win Produced values, which player deserves to be paid the most?
c. Fred
5. In 2008-2009, Kevin Durant averaged 25.3 points, 6.5 rebounds, 1.3 steals, 0.7 blocks, 2.8 assists, 18.8 field goal attempts, 7.1 free throw attempts, 3.0 turnovers, and 1.8 personal fouls.
What is his Wins Produced value?
d. 8.6
6. If “wins” are worth $1.67 million each, what should Kevin Durant have earned if was paid his MRP?
d. $14.36 million
7. A college player should turn pro when
a. staying in college another year increases his earnings at the interest rate
8. Salaries have risen dramatically in the NBA because of the dramatic rise in
c. the market value of the product the players produce.
9. If the Gini coefficient has risen then
b. the mean level of income has risen faster than the median.
10. The pay of hockey players is so much below that of basketball players because
c. greater TV revenue increases the marginal revenue product in the NBA.
11. The firm’s demand curve for labor reflects
a. the marginal revenue product of the worker.
0 0
1 30
2 45
3 55
4 60
5 60
12. Using the information in the table above, find the marginal product of the 4th worker.
c. 5
15. Why was Kevin Garnett’s seven-year $126 million contract worth less than $126 million on the day that that he signed it?
c. the present value of future payments
16. Suppose a college junior could earn a salary of $500,000 by declaring himself eligible for the draft. If he waits until after his senior year, his salary will be $600,000. If the interest rate is 8 percent, should he stay for his senior year or not?
a. Yes, because a 20 percent return exceeds the 8 percent interest rate.
17. Free agency came to MLB and the NFL in different ways because
c. the NFLPA had to rely on the courts.
18. In final offer arbitration players and owners submit positions to an arbitrator
b. who must choose one position or the other.
19. The ruling that NBA teams did not have to pay guaranteed contracts during the NBA lockout
probably
d. had no effect on the settlement’s timing but made it more favorable to the owners
20. In Wood v. NBA (1987), the court ruled that the NBA’s salary cap and draft rules did not violate antitrust laws because:
c. The NBA was not subject to antitrust laws due to the nonstatutory labor exemption
21. Free agency in the NFL has
a. increased average incomes but caused the Gini coefficient to rise
22. According to the Coase Theorem, free agency should leave the distribution of talent
d. the same as it always was
23. What type of union is depicted in the graph above?
a. Craft (trade) union.
24. Which MLB position is not consistent with a craft union interpretation of the MLBPA?
c. Designated Hitter
25. What type of union is depicted in the graph above?
b. Industrial union.
26. What happens to the magnitude of the deadweight loss in Figure above if after the wage is agreed upon, demand for the sport falls
b. Decreases.
27. Which of the following is not a function of a sports league?
c. Set ticket prices.
28. What would happen to the demand for attending Rangers games if a new MLB franchise was awarded to the city of Dallas?
b. Decrease.
29. The NFL shares gate revenue among all of the teams in the league. The revenue split is ____ % for the home team and ______ % for the rest of the league.
b. 60;40
30. In the evaluation of MLB talent, Bill James, the father of sabermeterics, has shown that _____ is a much better predictor of offensive ability than ______.
a. OBP; SLG