final exam Flashcards
Which of the four major professional leagues in the US has the greatest average attendance per event?
NFL
How much greater was the average attendance at MSU home football games in 2023 than the approximate average attendance per game for FBS college football overall (among the 130 +/- teams in the FBS, the top division of college football) last year?
Not quite twice as great.
Among the four major Detroit pro sports teams, which had the highest and which had the lowest total attendance for last season? (You may want to look up the attendance for pro sports teams for last season (2023) using the URL from the class lecture notes).
Highest: Tigers Lowest: Lions
Which professional sports team has the highest market value (according to Forbes’ latest data)?
Dallas Cowboys
Compare the market value of the Detroit Tigers to the Chicago White Sox (MLB) and the value of the Detroit Red Wings to the Chicago Blackhawks (NHL). (You will want to look up the value for pro sports teams as estimated by Forbes using the URL from the class lecture notes). In each case, which is the higher value team?
White Sox (but the Cubs are much higher!); Blackhawks
According to the most recent estimates, the most valuable of the four Detroit-area professional sports teams is the Detroit Lions primarily because
the Detroit Lions benefit from being in the most valuable of the U.S. professional sports leagues.
In the U.S. the spectator sports industry accounts for about what percentage of national GDP (that is, total national income)?
Less than 1 percent
The NFL Super Bowl is the most watched single sports event on television broadcasting in the U.S. each year. Which of the following is correct (identify all that apply)?
A. In recent years, about 40 percent of U.S. households with TVs were tuned to the Super Bowl.
B. Super Bowl TV ratings were higher 10 years ago than in the last several years.
C. Less than half of the people in the U.S. watch the Super Bowl typically.
The NFL is the most valuable sports league in the U.S. Who owns the NFL?
The owners of the NFL teams
Who authored, sponsored, and was most responsible for the adoption of the first major federal antitrust (anti-monopoly) law in the U.S., adopted in 1890? (You may have to do some independent research for this one.)
Senator John Sherman, try Wikipedia, Sherman Antitrust Act
MLB is exempt from US antitrust laws because
baseball is not interstate commerce, according to a Supreme Court case and decision.
Because of MLB’s treatment under the antitrust laws, MLB team owners may engage in which of the following activities that NFL team owners are not allowed to do?
A. Block the moves of teams to different cities.
B. Cooperate in preventing a new baseball league from forming.
C. Control ticket prices for all of the teams, if the League wished.
Which professional sports league has had the fewest challengers (rival leagues) historically?
MLB
Who was Pete Rozelle and what did he do? (You may want to read the excerpt posted on the class D2L site for this module.) (Professional Leagues)
A. He was Commissioner of the NFL from 1960 to 1989.
B. He lobbied Congress to adopt the Sports Broadcasting Act in 1961.
C. As Commissioner, he introduced revenue sharing to the NFL.
D. He arranged the NFL’s first national TV contract (CBS in 1962).
What was the effect of the federal Sports Broadcasting Act of 1961?
It permits the pro sports leagues to negotiate league-wide media contracts and specify how the revenue is divided.
Sometimes owners of sports teams are not concerned about the amount of profit earned by the team because they are using the team to sell another product. Historical examples often cited in the US include the Atlanta Braves and Anaheim Mighty Ducks. According to research, pro baseball in Japan, especially represented by the Yomiuri Giants, likely started as a way to increase sales of what product?
Newspapers
What percentage of revenue for the four major professional sports leagues in the US comes from ticket sales, on average approximately?
22%
Which pro league gets the largest share (that is, percentage) of revenue from ticket sales?
NHL
Which pro league gets the smallest share (that is, percentage) of revenue from ticket sales?
NFL
Ticket sales provide about what share of MSU athletics revenue?
18%
Which US pro league has the lowest average face-value ticket price?
MLB
Which US pro league has the highest average face-value ticket price?
NFL
If a game is not sold out, then the marginal cost to a team of letting one additional fan into the game venue is
essentially zero.
To maximize revenue from ticket sales, what price should the NCAA set?
$150
At the revenue-maximizing price, how many tickets would the NCAA sell?
12,000
- Suppose in the NCAA case in problems #8 and #9, the demand turns out to be the same but the NCAA only arranged for a facility with room for 10,000 spectators. In that case, what price should the NCAA charge for tickets?
- How many tickets would be sold at that price?
- $175, this is the highest price at which all 10,000 tickets can be sold. MR is still positive at this price, but the arena will not seat any more spectators.
- 10,000
The observed increase in sports ticket prices in recent years is primarily due to
increase in fan interest in and increase in the demand for attending games.
Baseball teams might charge higher prices for Saturday games than Tuesday games because
they expect demand to be greater on Saturday than Tuesday.
If the quality of a sports team decreases dramatically (that is, it wins many fewer games or loses by larger margins), then
demand for tickets is expected to decrease (shift leftward) because of a change in consumers’ attitudes about the team.
If an individual buys a ticket to a sporting event from another individual through the official marketplace “StubHub”, which is true?
The buyer, seller, home team, and StubHub are all better off (or at least not worse off).
Colleges as well as pro teams have embraced secondary ticket markets, and most have contracted with one company for reselling their tickets. For example, “The Official Ticket Marketplace of the Spartans” is
SeatGeek
Which pro sports league in the US shares the most revenue?
NFL
Which pro sports league in the U.S. relies on broadcasting (TV) for the largest share of revenue?
NFL
Under its new contract how much does ESPN pay the NFL annually for the rights to broadcast Monday Night Football?
$2.6 billion
In the NFL (pro football), what source of revenue is not shared?
Luxury boxes & suites
For the 2023 season, how many MLB teams had to pay the “competitive balance tax” (sometimes referred to as the luxury tax)?
8
Suppose in one league the observed actual standard deviation in winning percentages among the teams in one year is 0.375. If the teams were all of equal quality so the each team had an equal chance of winning every game, the expected standard deviation of winning percentages would be 0.125. Calculate the competitive balance statistic “R.” What do you conclude?
League is very imbalanced.
Considering play during the season, which statement best characterizes competitive balance historically (variation in winning percentages) among the U.S. pro sports leagues?
The NFL has been the most balanced and NBA the least.
Since 2000, which of the pro sports leagues in the U.S. has had the fewest number of teams win the league championship?
NBA
The Marginal Revenue Product of Labor is
A. Marginal Product of Labor x Marginal Revenue.
B. the monetary gain from another worker.
C. the demand for labor.
A monopsonist pays a wage that is
less than the marginal revenue product of the worker.
Suppose adding pitcher Mark Mulder to the Detroit Tigers roster yielded 3 additional wins and each additional win added $3 million in revenue to the Tigers. The Tigers paid Mulder $5 million. What is the Marginal Revenue Product of Mulder to the Tigers, and what is the amount of monopsonistic exploitation given his salary?
MRP: $9 million
Exploitation: $4 million
The “Reserve Clause” meant that
teams had a perpetual option (or right) to keep players.
Unions of professional sports athletes have
Grown in importance at the same time overall union importance in the economy has declined.
Which of the following is true?
A. Top athletic superstars earn much less than the top entertainment superstars.
B. MLB players have the highest average salary among the four major professional sports leagues.
C. NFL and NHL players have the lowest average salary among the 4 major professional sports leagues.
D. Professional sport salaries have increased about the same rate as the increase in national economy since the 1970s.
NFL and NHL players have the lowest average salary among the 4 major professional sports
Since 1970, the salaries of professional athletes in aggregate have
increased at a faster rate than salaries in the economy overall.
According to Forbes, what pro athlete earned the most money in 2023-24, and how much is that?
Ronaldo, $260 million
The NCAA is
A. an organization established by Congress that colleges and universities must join in order to participate in intercollegiate athletics.
B. a division of the US Department of Education that enforces rules and laws regarding college sports, including Title IX.
C. a voluntary organization established by colleges and governed by college presidents.
D. a private business that operates college sports championships and football bowl games.
E. an organization established in 1953 by the Big 10 conference
a voluntary organization established by colleges and governed by college presidents.
The original purpose for which the NCAA was founded was to
set rules of play for college football to curb violence.
The Cornell-Dartmouth football game in 1940 is especially interesting because
the eventual outcome represented the notions of high character, honesty, and fair play.
“Generated” revenue includes all of the following except ______________
A. revenue from ticket sales.
B. revenue from TV contracts.
C. student athletic fees.
D. revenue from parking and concessions sales.
student athletic fees.
The largest source of generated revenue for FBS athletics departments is
broadcasting/postseason earnings.
According to data reported by USA Today, which college athletics department had the greatest revenue in 2023? (slide shows 2022)
Ohio State University
The largest cost item in the athletic department budgets of FBS (Division IA) schools, on average, is for
salaries and benefits of coaches and athletic department staff.
According to the most recent data from USA Today, which college basketball coach has the highest salary and how much is it?
Bill Self, Kansas, $9.6 million
According to accounting data, athletics departments at NCAA institutions
in the Big 10 only some schools generate positive net revenues for athletics.
For 2022 (most recent NCAA data), how many college athletics programs generated positive net revenue (that is, had generated revenue greater than expenses or to put it another way, covered their costs)?
28
Under current NCAA rules, the number of permitted scholarships for men’s & women’s basketball is
15 for women’s basketball and 13 for men’s
A traditional Full Athletic Scholarship according to the NCAA definition included:
just tuition, room and board, and books
“Full Cost of Attendance” for college athletes according to the NCAA definition equals
tuition, room & board, books, supplies, and transportation
In response to several state laws (CA: “Fair Pay to Play”) and court cases, the NCAA is now allowing student-athletes to earn income from NIL. What is “NIL?”
Compensation for use of a student-athlete’s name, image, or likeness.
Recent “APR” reforms of academic standards for student-athletes by the NCAA:
focus more on progress towards graduation than on admission standards.
What is the APR for the MSU men’s and women’s basketball teams according to the most recent data?
Men’s BB: 1,000 (ave. = 967)
Women’s BB: __980 (avg. = 982)
Which statement best reflects recent graduation success rates for college athletes?
Graduation rates for “revenue sports” are lower than for other sports.
What is the most recent (cohort year 2016) official Graduation Success Rate (GSR) for the MSU men’s and women’s basketball teams as measured by the NCAA? (You can look this up using the URL provided in the class lecture notes available on D2L or in the notes.)
Men’s BB: ________88%____________
Women’s BB: ______92%______________
The probability of a Division 1-A football or basketball player having a professional career in that sport is:
between 1 and 5 percent
According to the most common application of Title IX, participation on women’s intercollegiate athletics teams
and men’s teams should be proportional to the enrollment of men and women within +/- 2 percent.
After the implementation of Title IX
A. the number of men’s and women’s teams are equal at each school.
B. the coach’s salary for women’s basketball equals that for men’s basketball.
C. the total (aggregate) amount of money spent for athletic scholarships is the same for women and men student-athletes.
D. the total (aggregate) amount of money spent for women’s sports is within 2 percentage points
of the total amount spent on men’s sports.
E. none of the above is correct.
E. none of the above is correct.
More than 45 years after the implementation of Title IX, what happened to the number of men’s and women’s athletic teams at NCAA member schools?
The number of women’s teams increased and the number of men’s team increased.
According to recent NCAA data, what percentage of student-athletes in all components of Division 1 were women?
47%
Which of the four major professional leagues in the US was the first to integrate in modern times, that is include non-white players?
NFL
Among MLB, the NFL, and the NBA in the U.S., which team was the last overall to add non-white players? And which was the last team in MLB only to add non-white players?
Last overall: Washington Redskins
Last in MLB: Boston Red Sox
Who was the first Black head coach of a major US pro sports team, and which team?
Bill Russell for the team Boston Celtics
Among the major revenue-generating college sports, the sport with the relatively greatest number of Black head coaches is
Men’s basketball
A player on the Detroit Lions who lives in Michigan
owes state income tax to Michigan and other states where the Lions play (if that state has an income tax).
Who was Bill Veeck?
- Owner of the Chicago White Sox and the the Cleveland Indians, who first integrated the American League
- Originator of the idea for video replay scoreboards and “speed guns” in baseball
- A sports promoter who developed a number of advertising ploys to attract fans
- Owner who first convinced the IRS that players should have tax depreciation like other assets
Suppose a professional sports team in the US has an operating profit for a year (that is, operating revenue is greater than operating costs that year). Despite earning a profit, such a team may pay no US federal business income tax that year because
additional tax deductions for player depreciation may eliminate the operating profit and create a tax loss.
Under current law, sports team tax deductions for player depreciation are limited to
100% of the team purchase price over 15 years.
Ford Field, where the Detroit Lions play football, is
owned jointly by the City of Detroit and Wayne County.
Which statement best reflects the construction of the newest stadiums in Detroit?
- They have shared financing, with both a public subsidy and team finance.
- Specific local or state taxes are dedicated to funding the stadiums.
Which of the following is most likely a true local economic benefit to a city from hosting the NCAA Final Four (basketball tournament)?
Increase in restaurant spending during the event compared to other periods
An all-star game is held in Our City one weekend day. 50,000 spectators attend the event at a price per ticket of $100. The league sponsoring the game receives all ticket revenue. Revenue from concession sales goes to the local arena. Half of the spectators live in OC, and half are from outside the area. If this special event was not being held in OC this day, there would be 5000 similar visitors from outside the City. Residents of OC who attend the game spend $20 at the game besides the ticket price. Residents of OC also regularly spend $20 per day on local weekend entertainment. Visitors to OC to attend the event spend $200 that day besides the ticket price, and, in addition, visitors spend $100 on traveling to OC.
The best estimate of the direct local economic impact (no multiplier effects) of the event is
$4,000,000
I’m counting only the $200 spending for each additional out-of-area visitor, not the ticket revenue which goes to the league. There are 20,000 additional out-of-area visitors (25,000 – 5,000)
Indirect or “quality of life” benefits from having a sports team include
- the benefit to local residents who attend the team’s games if the ticket price is less than what they were willing to pay.
- the enjoyment received by local residents who do not buy tickets and attend the games, but watch on television.
According to the research by Baade, Baumann, and Matheson reported in the Journal of Sports Economics, over the long run localities that have major college football teams and games
A. see higher income and more employment than similar cities without football.
B. have higher income and more employment than similar cities without football if the local
team consistently has a winning record.
C. have higher income and more employment than similar cities without football if the local
team has a large number of home games.
D. All of the above are correct.
E. None of the above is correct
E. None of the above is correct
Which of the four major professional leagues in the US has the lowest overall attendance annually (assuming a full season)?
NFL
How much is the approximate average attendance per game for college football (among the 130 teams in the FBS the top division of college football) in the last regular year with fans?
41,500
Attendance at live sporting events has decreased or at least has become a concern of teams and leagues. A reasonable explanation for this trend is that
- cost of attending events (tickets, parking, concessions) has increased
- substitutes for live sports viewing (broadcast steaming and so on) have become better or less expensive
According to the most recent estimates the most valuable of the four Detroit-area professional sports teams is the Detroit Lions primarily because`
The Lions benefit from being in the most valuable of the US professional sports leagues
Major League Baseball (MLB) has not been convicted of violating the Sherman Antitrust Act because
due to a US supreme court decision baseball was declared not interstate commerce and has been exempt from the antitrust laws
Professional football, basketball, and hockey leagues in the U.S. all have
limited antitrust exemption related to broadcast contracts
Because of MLB’s treatment under the antitrust laws MLB team owners may engage in which of the following activities that NFL team owners are not allowed to do?
- block the moves of teams to different cities
- cooperate in preventing a new baseball league from forming
- control ticket prices for all of the teams if the league wished
The federal Sports Broadcasting Act of 1961 passed by Congress and signed by the President
- made it legal for teams in a league to cooperate (work together) in negotiating a league-wide broadcasting contract and specify how the revenue is divided
- contributed to the establishment of revenue sharing in the NFL
Which of the four major US pro leagues has not faced a new rival league in the last 60 years?
MLB
The NHL is the major professional sports league in the United States that has the highest relative reliance on ticket sales for revenue (highest percentage). What is the primary reason?
The NHL receives a relatively small amount of revenue from TV compared to other leagues
Among the major US pro sports leagues average ticket prices are three times greater in the NFL than in MLB because
-the supply of seats to fill in MLB is higher than in the NFL
-MLB teams play 162 games whereas NFL teams play 17
-NFL teams utilize premium seating to a greater degree than MLB does
Consider the following demand curve for a championship football game where the seating capacity in the stadium is 60,000. What is the profit maximizing price and quantity of tickets/spectators if the league behaves like a monopoly and charges a single price?
P- $500, Q-50,000
Suppose that most fans of a baseball team prefer Saturday and Sunday games (regardless of opponent) to games at other times. If the team is aware of this fact and wants to increase revenue based on this difference in demand which pricing strategy would accomplish that goal?
- charge higher prices for sat and sun games than other times
- offer “special discounts” for games during the week
- require that anyone buying a ticket for a saturday or sunday game also buy a ticket for a weekday game
MSU has a contract with SeatGeek as “The Official Ticket Marketplace.” Which is a likely result of this arrangement?
- it makes it easier for MSU to sell season tickets
- selling MSU tickets above face value is legal under MI law with this contract
- MSU receives additional revenue when a season ticket holder resells a ticket
Charles, a season ticket holder, pays $100 for a ticket, but he subsequently sells it to Linda for $75. From this information, one can conclude
-charles is better off as a result of the transaction
- at the time of sale, charles valued his ticket at less than $75
- linda values the ticket by at least $75
If the quality of a sports team decreases dramatically (that is it wins many fewer games or loses by larger margins) then
- fewer spectators are expected at each game
- Demand for tickets is expected to decrease (shift leftward) because of a change in consumers’ attitudes about the team
- the team will want to lower prices if it wants to maximize revenue
- more tickets will be offered for sale on sites like stubhub
Suppose an NBA team signs two superstar players who are free agents and pays them high salaries. The team is observed to raise ticket prices. Why did the team increase ticket prices (assuming it is trying to maximize profits)?
demand to see games increases because of the new superstar players
Which is true about the NFL TV/broadcasting contracts?
- one network pays about $2.6 billion annually for the rights to monday night football
- starting in 2023, the NFL will receive more than $10 billion annually from broadcast rights contracts
- the NFL has contracts with all of the major TV networks plus some streaming services
Which major professional sports league in the United States has the smallest variation in relative revenue among its teams?
NFL - has the most revenue-sharing
In the National Football League (NFL) what source of revenue is not shared among the teams by the League?
revenue from luxury boxes and suites
One potential problem with sharing revenue to improve competitive balance is
many teams may not use shared revenue to hire better players or improve the team
By most measures the professional sports league in the US with the least competitive balance in the last 30 years is
NBA
Which of the following statements is true about competitive balance in Major League Baseball (MLB)?
- MLB has been more balanced since 2000 rhan it was in the 1950s and 1960s
- since 2000, almost half of the MLB teams have won the championship
what are strategies for competitive balance?
- limits on team spending to promote financial fairness
- redistribution of wealth among teams to balance resources
- giving weaker teams access to top talent first
If the ratio of actual standard deviation of team winning percentages in a season to the “ideal” or “balanced” standard deviation is 3.0 in the NBA and 1.5 in the NFL the implication is
the NFL was more balanced competitvely that season than the NBA
what is a monopsony?
- a labor market (or any market) in which there is only one buyer (demander) of workers (or a good)
- a labor market in which workers are paid less than the value of what they produce (more of a consequence of one)
If adding left-winger Taro Hirose to the Detroit Red Wings (NHL) roster yielded 2 additional wins and each additional win added $1 million to the Red Wings and Hirose was paid $1 million then the amount of monopsonistic exploitation of Hirose would have been
$1 million. his revenue product is 2 million, but if he is only paid 1 million than the exploitation is 1 million
The “Reserve Clause” used in major league baseball and some other sports
- was challenged by Curt Flood in court, he lost
- resulted in players receiving salaries less than their Marginal revenue product (economic value)
Which is true about labor organizations in sports?
sports unions have grown in importance at the same time they have declined in importance in the broader economy
Which US pro sports league has the highest average salary based on the most recent data?
NBA
Which of the following is true about pro athlete earnings?
- top athletic superstars earn income similar to top entertainment superstars
- NFL players have the lowest avg salary among the four major professional sports leagues in the US
- professional sport salaries have increased faster or at a greater rate than the increase in national economy since the 1980s
- pro sports player unions have increased in importance at the same time that union membership in the overall economy has declined
