Exam 2 possible questions Flashcards
Suppose the large market team in a league had to send a lump sum of $15 million per
year to the small market in their league. According to our two team fixed talent model,
how would this affect player salaries?
(a) The small market teams would improve at the expense of the large market teams.
(b) It wouldn’t.
(c) Both teams would improve winning percentages.
(d) Both teams would lose more games.
(a) The small market teams would improve at the expense of the large market teams.
Which of the following is a positive externality caused by subsidies for the Columbus
Crew?
(a) Restaurants in the arena district will increase hiring
(b) Fans purchasing tickets will enjoy the game more.
(c) Traffic in the arena district will be terrible.
(d) All of the above
(a) Restaurants in the arena district will increase hiring
Which is true of franchises that have recently built new stadiums?
(a) Typically the team gets worse.
(b) Typically the team will be better and stay better for a long (> 10 years) period of
time.
(c) Typically team performance in unaffected by new stadiums.
(d) Typically the team performs better for a short (< 10 years) period of time.
(d) Typically the team performs better for a short (< 10 years) period of time.
How have fans benefited from new stadium construction in the last 20-30 years?
(a) Single sport stadiums have become more prevalent, providing better viewing.
(b) Newer construction techniques have eliminated many of the obstructed view seats.
(c) Newer stadiums are more aesthetically pleasing.
(d) All of the above
(d) All of the above
In the two team fixed talent model which area describes payroll for the large market
team?
(a) P ∗ * M R∗
L
(b) P ∗ * W ∗
L
(c) M R∗
L * W ∗
L
(d) P ∗ * D∗
L
(b) P ∗ * W ∗
L
Who owns the majority of Nationwide arena?
(a) Nationwide Insurance
(b) Columbus Blue Jackets
(c) Franklin County
(d) The state of Ohio
(c) Franklin County
Which is true of baseball’s reserve clause?
(a) Teams retain player rights indefinitely under the reserve clause.
(b) It ended in the 1970s.
(c) The reserve clause prevented free agency.
(d) All of the above
(d) All of the above
Which of the following policies restrict pay for players in the NBA?
(a) Rookie contract structure
(b) The draft
(c) Salary cap
(d) All of the above
(d) All of the above
Which best describes the Coase theorem in regards to MLB players?
(a) MLB players under current contracts are traded to the teams for which they provide
the most value.
(b) MLB players are paid similar wages regardless of team.
(c) MLB players wages increased drastically when free agency was first introduced.
(d) Future MLB players are not well represented by the current union representatives.
(a) MLB players under current contracts are traded to the teams for which they provide
the most value.
Which of the following increases player’s bargaining power in the NFL?
(a) A new football league, the XFL is formed.
(b) Expected career length is lengthened by medical advances
(c) Owners only receive stadium subsidies under the condition that 1 million people per
year attend games.
(d) All of the above
(d) All of the above
What type of market does the NFL have in purchasing professional football labor?
(a) Monopsony
(b) Monopoly
(c) Competitive
(d) Competitive Monopoly
(a) Monopsony
Under which of the following scenarios would a subsidy be socially beneficial? (Assuming
the subsidy is correctly specified and the taxes necessary to pay the subsidy are a sunk
cost.)
(a) Consumer surplus is larger than the total subsidy cost.
(b) Marginal benefits to society are not all captured by ticket demand.
(c) Additional economic activity is large enough to justify the subsidy.
(d) All of the above
(d) All of the above
Suppose a player enters forced salary arbitration in MLB. The team enters a proposed
contract of $5 million and the player enters $12 million. The arbitrator estimates the
players value at $10 million. What will his salary be?
(a) $10 million
(b) $12 million
(c) $7.5 million
(d) $5 million
(b) $12 million
Cost Benefit analysis of stadium subsidies has generally found
(a) Stadium subsidies bring the city more revenue than they cost.
(b) Stadium subsidies cannot be justified with cost benefit analysis.
(c) Stadium subsidies paid through sales tax are justified, while those paid through
property taxes are not.
(d) None of the above
(b) Stadium subsidies cannot be justified with cost benefit analysis.
Which describes marginal revenue product of labor for a baseball player?
(a) Profits per win * Wins above replacement
(b) Revenue per win * Wins above replacement
(c) Revenue per win * Wins above replacement - Salary
(d) Revenue per win - salary
(b) Revenue per win * Wins above replacement
Which figures are included in calculations of a total subsidy for a stadium?
(a) Tax abatements granted to the stadium
(b) Upgrades necessary for utilities
(c) Loans at a discounted interest rate
(d) All of the above
(d) All of the above
Suppose a city is considering a subsidy for a new stadium. The city plans to spend $100
million. The marginal propensity to consume is 0.9 and the marginal propensity to import
is 0.4. What is the expected total economic output caused by the subsidy?
(a) $1 billion
(b) $200 million
(c) $111 million
(d) $77 million
(b) $200 million
- multiplier = 1 / 1 - (MPC - MPM)
- = 1 / 1 - (0.9 - 0.4)
- multiplier = 2
- Total economic output = subsidy *multiplier
- 100 million * 2
- Total economic output = 200 million
Which of the following describes the winner’s curse in relation to bidding on the FIFA
world cup?
(a) The country that bids the most must also bribe FIFA officials.
(b) The country that hosts the World Cup does not get to keep the TV revenue.
(c) The country that bids the most probably exaggerated the value of hosting by the
most
(d) All of the above
(c) The country that bids the most probably exaggerated the value of hosting by the
most
hich best describes the ”all or nothing” demand curve in regards to hosting the Olympics?
(a) Countries overpay for hosting kayaking so that they can also host women’s gymnastics.
(b) Countries must build huge, expensive campuses to field the games.
(c) Countries that want to host the Olympics typically bid on the World Cup too.
(d) All of the above.
(a) Countries overpay for hosting kayaking so that they can also host women’s gymnastics.
Which is true of host countries in the Olympic games?
(a) Host countries own the broadcast rights.
(b) Host countries typically use existing structures to house the Olympic games.
(c) Host countries typically spend more than they anticipated.
(d) All of the above
(c) Host countries typically spend more than they anticipated.
Which of the following is true of ex ante reports which predict financial windfalls to
countries hosting the Olympics or the World Cup?
(a) Benefits are exaggerated
(b) Costs are underestimated.
(c) Reports are paid for by organizations that will benefit from the city or country
hosting.
(d) All of the above
(d) All of the above
Which best describes specific training for an NFL quarterback?
(a) Learning the play book of the team for which they currently play.
(b) Lifting weights
(c) Throwing Mechanics
(d) All of the above
(a) Learning the play book of the team for which they currently play.
Consider the supply and demand for Floyd Mayweather fights. Which describes the
upward slope of the supply curve?
(a) Floyd will fight in more fights if he gets paid more.
(b) Floyd will fight more often as his technique and fitness improve.
(c) Floyd will fight more often if more viable opponents are available.
(d) All of the above
(a) Floyd will fight in more fights if he gets paid more.
Under which condition(s) could player salaries be positively effected by a salary cap?
(a) A salary cap increases competitive balance, raising MR for all teams.
(b) The salary cap is only binding on some teams.
(c) The salary cap includes player maximums.
(d) The salary cap increases total revenue for all teams.
(a) A salary cap increases competitive balance, raising MR for all teams.
