Exam #2 ECO 330

Be able to calculate the standard deviation.

Standard deviation is the distance of the typical observation from the sample mean. This formula assumes you are measuring the entire league. Meaning you are including all teams (not just a conference or a division) Calculation: In written notes The larger the standard deviation, the greater the dispersion of the winning percentages The formula changes if you are looking at a specific league or conference - There is inter-league play, which means you need to use the mean w%

In MLB, if a team exceeds the luxury tax by $40 million, what happens?

- 40 million over threshold, teams Rule 4 Draft pick is moved back 10 places

An NFL team that loses three UFA and signs two UFA will receive? - A supplemental draft pick - A regular draft pick - A compensatory pick - A competitive balance draft pick

- A compensatory pick

What is a collective bargaining agreement? - A contract between a team and a specific player - A contract between the league and the players union - A contract between the league and TV networks - None of the above

- A contract between the league and the players union

How does a draft promote competitive balance?

- A draft promotes competitive balance by giving the weaker performing team the first right to higher quality rookies

A public good is: - A good that can be excluded from public consumption. - A good that is rivalrous - A good provided through the market system - A good that is non-exclusive

- A good that is non-exclusive

Which of the following best describes a personal seat license (PSL): - A season ticket that includes a specific seat assignment. - The price is based on the cost of a season ticket. - The right to a specific seat, which includes the cost of a season ticket. - A license that gives the holder the right to buy season tickets.

- A license that gives the holder the right to buy season tickets.

How did stadium design change in the 1990s? How did stadium capacity change?

- A new era began in which baseball and football team occupied separate facilities i. New baseball-only stadiums that replaced the multi-purpose stadiums shrank by over 10,000 seats ii. The size of the multi-purpose stadiums was thus a compromise, too large for baseball and too small for football iii. The cookie cutter stadiums' circular shape was an attempt to meet the needs of both sports but did not work well for either

Which of the following best explains substitute spending? - A portion of the spending generated by the stadium project may have otherwise taken place on some other entertainment activity. - Some jobs will be substituted as a result of the new stadium project. - The increase in taxes associated with the new stadium will substitute household spending. - Direct economic activity from the stadium project is taken from indirect economic activity.

- A portion of the spending generated by the stadium project may have otherwise taken place on some other entertainment activity.

A monopsony is de ned as? - A single seller of a product. - Two sellers of a product. - Two buyers of a product. - A single buyer of a product

- A single buyer of a product

How can a team pay a player a higher maximum?

- A team can use the "designated player rule" to pay a higher maximum i. Must meet certain requirements: - Voted to 2 All-Star Games or named ALL-NBA twice or voted MVP

Which of the following is NOT true about a positive externality? The government could impose a subsidy to increase the quantity A third party is benefiting from the sporting event The socially optimal quantity is higher All of the above are true

- A third party is benefiting from the sporting event ??

Which leagues have a salary cap and which leagues have a luxury tax?

- All leagues besides the MLB have a salary cap - NBA and MLB have luxury tax

Sports subsidies can include: - Construction subsidies - Operating subsidies - Infrastructure subsidies - All of the above

- All of the above

Under what conditions could you use the standard deviation to compare competitive balance across seasons? - The number of games has not changed - The number of teams has not changed - No significant changes to the rules - All of the above

- All of the above

Which of the following is true about the MLB luxury tax? - The tax rate rises each season a team exceeds the tax threshold - If a team is $20-$40 million over the threshold they have to pay an additional 12% surcharge - If a team is $40+ million over the threshold hold the teams Rule 4 draft pick is moved down 10 spaces. - All of the above are true

- All of the above ??

Which of the following is true about the MLB luxury tax? - The tax rate rises each season a team exceeds the tax threshold - If a team is $20-$40 million over the threshold they have to pay an additional 12% surcharge - If a team is $40+ million over the threshold hold the teams Rule 4 draft pick is moved down 10 spaces. - All of the above are true

- All of the above are true

Which of the following is an argument against the public funding of stadiums: - Money is being spent to help billionaires. - The biggest impact is on the local economy. - Money could be used for education and infrastructure. - All of the above.

- All of the above.

What is the Designated Rookie Player Rule? - Allows a team to designate one player with more than six years in the league to move up from the 25% cap range to the 30% cap range if they meet certain performance criteria - Allows a team to designate one player with less than six years in the league to move up from the 25% cap range to the 30% cap range if they meet certain performance criteria - Allows a team to designate one player, regardless of how long they've been in the league, to move up one tier in the maximum salary table - None of the above are true

- Allows a team to designate one player with less than six years in the league to move up from the 25% cap range to the 30% cap range if they meet certain performance criteria

Explain the Mid-Level exception. What are the three types?

- Allows each team to sign players even if the team is already over the salary limit or if signing a player to such a contract puts the team over the limit - All categories can be used on multiple players until value of contract is used - Can be used every year - Three types: i. Non-taxpayer: --- Team salary cannot exceed luxury tax threshold ii. Taxpayer --- Team salary is above the luxury tax apron iii. Room level --- Available to teams far enough below the cap that they do not qualify for exceptions

Explain the Larry Bird Exception (all three).

- Allows teams to exceed their cap on their own free-agents - Divided into three categories: i. Bird exception: 3 years with team (free-agent) ii. Early bird: 2 years with team (free-agent) iii. Non-bird exception: Would qualify for bird exception, but team used it on another players (at least one season with the team) Can include a "renounced player"

In a bi-lateral monopoly, how are wage rates determined? - Bargaining - Players union - Arbitration - Free-agency

- Bargaining

What is a public good?

- Benefits from the presence of a sports franchise even to those who do not attend games i. Consumers may place an "option value" on a sports team, a value one places on having the ability to go to a game if one chooses even if one rarely actually chooses to attend sporting events ii. States, cities, and neighborhoods can feel a sense of identity from having a professional sporting events - Teams can be a public good, since these effects are non-exclusive and non-rival in consumption i. Non-exclusive: those who have not paid for the good cannot be excluded from its consumption ii. Non-rival: one person's consumption does not mean that others cannot consume the good - While game attendance is exclusive, as those who do not pay cannot enter the stadium, price and the option value of having a team are non-exclusive goods - Residents of small to midsized cities feel they are part of a "big-league" city when their hometown has a major league franchise

What is a cap hold? How can a cap hold be removed (three ways)?

- Cap hold: Teams free-agents count against the cap, thus limiting cap space (actually cap hit is based on certain % of previous salary) - Cap hold can be removed by the three following: i. Player signs with another team ii. Player signs with old team iii. Old team renounces the player (giving up it's right to use bird rights-can still use non-bird)

Induced economic activity: - Spending that occurs at the stadium - Changes in household income form spending - Additional output from spending - Business activity from spending

- Changes in household income form spending

In the NFL, what is the 30% rule?

- Contact's cannot have an annual increase of more than 30% of the salary (excluding signing bonuses)

How do unsigned draft picks impact the cap?

- Draft pick salary cap hit - Salary cap reflects the value of their salary

In the NFL, what is the Top 51 Rule?

- During off-season, roster expands to 90 players - Top 51 contracts count during the offseason --- It affects the draft

In the NFL, what is the Top-51 Rule? - During offseason, rosters expand to 90 players, therefore only the top-51 salaries do not count against the cap in the offseason - During offseason, rosters expand to 90 players, therefore only the top-51 salaries count against the cap in the offseason - Only top-51 salaries count against the salary cap during offseason and during regular season - Only top-51 salaries count against the cap in revenue sharing - Only top-51 salaries count against salary cap during the season

- During offseason, rosters expand to 90 players, therefore only the top-51 salaries count against the cap in the offseason

Distinguish the difference between implicit and explicit costs.

- Explicit: means something is made clear and stated plainly - Implicit: something is implied but not stated directly

Escrow is a quasi-tax by withholding a certain percentage of a teams revenue. True or False?

- False

The Canadian dollar, when compared to the U.S. dollar has dropped by over 60%. True or False?

- False

The low Canadian dollar has reduced the value of NHL franchises. True or False?

- False

The new CBA gives players a 57% stake in NHL revenue. True or False?

- False

Why study competitive balance? - Owners get less financial reward if the team is successful but does not always win. - The league gets less financial reward if different teams win - Fans like to see their teams win, but real competition makes the sport more interesting. - Team profits are higher if they always win

- Fans like to see their teams win, but real competition makes the sport more interesting.

Why do leagues oppose municipal ownership of a team?

- Financial statement may become public

In the NFL, how does a player achieve a credited season ? - Full pay status for 10 or more regular season games - Full pay status for 6 or more regular season games - Full pay status for the entire regular season - Full pay status for three or more regular season games

- Full pay status for three or more regular season games

Why does the NBA have as soft cap?

- Give the team ability to retain their own players - Allows teams to make limited changes each year

What is the rationale for the NBA having a soft cap? - Decrease overall team payrolls - Gives smaller market teams the ability to compete with large market teams - Gives teams the ability to retain their own players - Allows teams to sign as many players as they want

- Gives teams the ability to retain their own players

What are the three types of guaranteed contracts? When is a contract fully guaranteed?

- Guaranteed: i. Skill: Cut because the team believes the player no longer has the skills or lost the skills of the position ii. Cap: Cut to get under the salary cap, sign FA, or sign a RFA iii. Injury: Player is terminated because they can't pass physical or unable to perform football duties ---- This is the most common guarantee - Fully guaranteed if contract covers all three

What is the formula for the HHI and in the context of sports, what does it measure specifically?

- Herfindahl-Hirschman Index was original developed to measure the concentration of firms in an industry, but sports economics use it to measure the concentration of league championships - Formula is in written notes - The maximum, 1, indicates perfect imbalance, and (1/N) is the minimum if the number of years exceeds the number of teams, or (1/T) otherwise

How is a teams draft pick impacted by the luxury tax surcharge?

- If draft spot is in top 6, then second highest draft pick is moved back 10 spaces

What could the government do to reduce the impact of a negative externality? - Impose a tax - Add a subsidy - Not use taxpayer funds for stadium construction - Lower the price - Increase the quantity produced

- Impose a tax

What impact does a new stadium have on wins?

- Increase in attendance in the years following the construction - There is an increase in revenue, which allows for teams to buy better talent but no facilities do not lead to more wins

Which of the following best describes the indirect benefits of hosting a professional sports team? - Positive and negative externalities. - Having new stadiums. - Additional spending at the stadium. - Increase in sales to businesses around the stadium.

- Increase in sales to businesses around the stadium.

Economic impact analysis includes: -The sales of personal seat license - The impact of tax incremental financing - Indirect economic activity - The impact of the G4 program

- Indirect economic activity

A draw back of an economic impact analysis? - The benefits occur over many years - They are non-binding - Leakages from player payroll - They are used to measure non-market goods

- Leakages from player payroll

What type of draft does the NBA have (lottery, reverse order, or mix)?

- Lottery based draft -- Lottery determines the top spots, remaining spots are filled in reverse order

What type of draft does the NHL have (lottery, reverse order or mix)?

- Lottery based draft --- Lottery determines the top spots, remaining spots are filled in reverse order

Be able to describe what a salary cap is and how it promotes competitive balance.

- MLB is only league without salary cap. - Salary cap: i. it targets payrolls, not individual salaries ii. salary caps are accompanied by minimum salary levels - Together, they both create a band, setting both a ceiling and a floor on what teams can spend on players

What is the league minimum and maximum salary based on? (NBA)

- Minimum is based on years in the NBA - Maximum is based on years as well

What is a credited season?

- Must be on 55-man roster for at least three regular season games

How much of the cap must the teams spend?

- NBA teams must spend 90% of the cap amount (the floor).

Which of the following is a method a team owner can use to fund a new stadium? - New taxes - TIF - NFL G4 Program - Issue municipal bond

- NFL G4 Program

Distinguish between a hard cap and a soft cap.

- NFL and NHL both have a hard cap (an absolute limit, which means you CANNOT go over the limit) - NBA payrolls have a soft cap (a cap with exceptions) - MLB only has luxury tax

In the 1960s, 70s, and 80s, how were stadiums designed?

- Numerous cities constructed large, circular, multi-purpose stadiums designed to be able to host both football and baseball -- The average capacity of these facilities for baseball was 52,659 -- "cookie -cutter" stadiums

What is the honeymoon effect? Why is the honeymoon effect larger in MLB?

- Of a new facility on attendance has received a great deal of attention, which studies have showing that a new facility has a greater impact on baseball teams than on teams in the other major sports, increasing attendance by one-third i. Studies show that a new park brings higher attendance for about 10 years in baseball ii. The effect is shorter for other sports -- NBA and NHL have slightly shorter effects -- Baseball games do not typically sell out, so there is more room to grow -- New stadium cannot mask the quality of play

How does an NFL player earn an accrued season? - Play in three regular season games - Play in half of the regular season games - Play in six regular season games - None of the above

- Play in six regular season games

How does a player qualify for salary arbitration in MLB? - Over four years of experience - Player can qualify as a Super-2 - If they were part of the Rule 4 draft - If they were part of the Rule 5 draft

- Player can qualify as a Super-2

A draw back of an economic impact analysis? - Player income may not be spent in the local economy - The benefits occur over many years - They are non-binding - They are used to measure non-market goods

- Player income may not be spent in the local economy

What is the supplemental draft and what players qualify?

- Players who have exhausted their college eligibility or unable to attend college (disciplinary reasons) qualified for this draft

If the Canadian dollar increase from C$1.31 to C$1.41 per U.S. dollar, what impact will that have on a Canadian teams payroll? - Players will become cheaper - Canadian teams become more competitive - Players will become more expensive - Ticket prices decrease

- Players will become more expensive

Where does the NBA luxury tax money go?

- Prevents teams from abusing the exception - Where does the money go? i. Up to 50% may be given to non-taxpaying teams ii. Up to 50% may be used for league purposes

Where does the NBA luxury tax money go?

- Prevents teams from abusing the exception Where does the money go? i. Up to 50% may be given to non-taxpaying teams ii. Up to 50% may be used for league purposes

Why have a salary cap minimum?

- Prevents teams from substantially under-investing in talent

Which of the following is not one of the three types of contingent valuation surveys? - Open-ended survey - Real estate appraisal - Bracketed survey - Close-ended survey

- Real estate appraisal

What are the four components of competitive balance?

- Revenue sharing - Salary Cap - Luxury Tax - Draft

When does revenue sharing increase competitive balance?

- Revenue sharing increases competitive balance if teams that receive revenue use it to improve the quality of the team (i.e. maximize wins)

Why does the league benefit when large-market teams win more often?

- Revenue sharing is problematic because the entire league benefits when large-market teams win more often.

Why share revenue? - Revenue sharing policies help mitigate the impact of high revenue teams. - Allows a smaller market team to qualify for competitive balance draft - Gives a low win % team a higher draft pick - It increases the leagues profits

- Revenue sharing policies help mitigate the impact of high revenue teams.

How is the draft order determined?

- Reverse Order Draft

What are the two types of drafts?

- Reverse-Order i. Teams with worse record the previous season drafts first - Lottery i. Teams are put into a lottery for top picks with the odds of winning based on previous season performance

What are the two types of drafts in the NFL?

- Reverse-order - Supplemental Draft

Explain the rookie and minimum salary exceptions

- Rookie: Sign rookie even if over the cap - Minimum Salary Cap: Sign to minimum even if over the cap

What is salary cap carry over?

- Salary cap carry over: unused cap space can be rolled over

How do NBA cash incentives impact the cap?

- Signing bonus is prorated over the life of the contract Performance divided into categories i. Likely to be earned - included Not likely to be earned - not included

All of the following are reasons stadiums costs have risen so dramatically, except: - The cost per square foot has increased. - Stadiums are more elaborate. - Stadiums are located in suburban areas. - Stadiums are bigger.

- Stadiums are located in suburban areas.

The four types of free-agents in the NFL include all of these except? - Compensatory free-agents - RFA - UFA - Exclusive rights free agent - Supplemental free agent

- Supplemental free agent

In MLB, what are 'surcharges' and why were they included in the new CBA?

- Surcharges: i. Designed to curb dodgers and yankees ii. if you 20 to 40 million over the threshold then you pay 12% surcharge - 40 million over = 42.5% for first time offender, 45% after

In MLB, what are the tax rates for offenders?

- Tax starts at 20% for first-time offenders - Tax rises with the number of abuses ---- 30% second time ---- 50% third time + - if the team falls below CBT for a season, the penalty level resets

User fees are best described as: - Taxes on hotels - Taxes on tickets or concessions - Vertical equity - An added state sales tax

- Taxes on tickets or concessions

What teams qualify for the competitive balance draft?

- Team must fall in bottom 10 in revenue and market size - MLB uses a formula that factors in revenue and winning %

Which of the following are one of the two reasons for publicly funded sports stadiums? - Lower overall ticket costs - Teams are considered public goods - To reduce the level of negative externalities - To increase profits to the cities

- Teams are considered public goods

With the Larry Bird exception: - Teams can exceed the salary cap on any free-agent. - Teams can exceed the cap on any veteran free-agent. - Teams can exceed the cap on their own free-agents. - Teams can exceed the cap on any free-agent that has never played on their team.

- Teams can exceed the cap on their own free-agents.

In MLB, which teams qualify for the competitive balance draft? -The 20 teams with the worst winning percent in the previous season. - The 5 smallest market teams and the 10 lowest-revenue teams. - The 10 smallest market teams and the 10 lowest-revenue teams. - The 10 teams with the worst winning percent in the previous season.

- The 10 smallest market teams and the 10 lowest-revenue teams.

In the NFL, what is the minimum the league must spend? What is the minimum each team must spend?

- The LEAGUE must spend at least 95% of the cap - Each TEAM must spend at least 90% of the cap - Minimum salaries is based on the "credited seasons"

Why share revenue?

- The amount teams are required to spend on payroll is based on a percent of league revenue - Baseball is only league without salary cap - Large market, thus high revenue, teams can increase this required amount - Small market teams are then forced to pay more - Revenue sharing policies help mitigate the impact of high revenue teams

In the NFL, what is meant by 'black-loading' contracts?

- The big money is paid near the end of the contract - Team can release player before contract is due - Signing bonuses are an incentive to get player to sign a back-loaded contract

Why did the Brooklyn Dodgers move to L.A.? - The team was not profitable in Brooklyn - The team was not winning in Brooklyn - The economic profit in L.A. was higher than in Brooklyn - Attendance was very low in Brooklyn

- The economic profit in L.A. was higher than in Brooklyn

In the NFL, which of the following is true? - The league has to spend 90% of the cap and each team has to spend at least 95% of the cap - The league has to spend 95% of the cap and each team has to spend at least 90% of the cap - Both the league and each team each have to spend at least 90% of the cap - The league has to spend 48.5% of the cap and each team has to spend at least 90% of the cap

- The league has to spend 95% of the cap and each team has to spend at least 90% of the cap

Why have a salary cap minimum? - The minimum payroll values prevent large market teams from substantially over-investing in talent. - The minimum payroll prevents one team from substantially over-investing in talent. - Salary caps to not have minimum salaries - The minimum payroll values prevent teams from substantially under-investing in talent.

- The minimum payroll values prevent teams from substantially under-investing in talent.

Economic impact studies tend to focus on increased tax revenues that the city might receive. Why is this an issue? - Team revenue is not taxed locally. - Sports teams make a small contribution to the local economy. - The money spent could reflect substitute spending. - Players don't spending money locally.

- The money spent could reflect substitute spending.

What is dead money and how does it impact the cap?

- The money you owe if you cut/trade the player before contract expires --- This includes signing bonuses

Explain the relationship between binomial distribution and competitive balance. - The more teams in the league the less competitively balanced the league becomes. - The more games in a season the more competitively balanced the league becomes. - The more games in a season the less competitively balanced the league becomes. - The more revenue distributed the more competitively balanced the league becomes.

- The more games in a season the more competitively balanced the league becomes.

Why must the leagues intervene to promote competitive balance (two reasons)?

- The motivation of team owners - The market size

The biggest impact of a new stadium is typically - An increase in team payroll - An increase in attendance - The number, size, and price of luxury boxes - An increase in concession revenue

- The number, size, and price of luxury boxes

What is the relationship between franchise value and luxury seating?

- The owner gets to keep a larger part of the revenue because of the luxury boxes

Be able to calculate the competitive balance ratio.

- The ratio of the actual standard deviation to the ideal standard deviation - Formula in written notes

Which of the following is NOT true about a negative externality? - The government could impose a tax to reduce the externality - The socially optimal price is lower - The socially optimal quantity is lower - A third party is bearing the cost of the sporting event

- The socially optimal price is lower

Why is a sales tax not a popular way to fund a facility? - The tax rarely raises enough money - Its a difficult to collect sales tax - It has vertical equity but not horizontal equity - The tax burden can fall on those who were not a target of the tax

- The tax burden can fall on those who were not a target of the tax

Why are labor unions in sports considered hybrid unions?

- The union represents players with a speci c skill within a specific industry

Option value is de ned as: - The value of a player's option to be traded - The value of a team's option to build a new stadium - The value of the option to add additional luxury suites to the stadium - The value one places on having the ability to go to a game if one

- The value one places on having the ability to go to a game if one

How are wages determined in a bilateral-monopoly? - The wage level is based on market conditions. - The wage level is based on the market power of the monopsony. - The wage level is based on the market power of the monopoly. - The wage level is based on who has the strongest bargaining power.

- The wage level is based on who has the strongest bargaining power.

Which of the following is a drawback to using the contingent valuation method? - They are binding agreements. - They are based on hypothetical actions instead of real actions. - They are based on market valuations. - They are based on survey questions.

- They are based on hypothetical actions instead of real actions. ??

In the NFL, how do signing bonuses impact the cap?

- They are prorated over the salary cap - You collect signing bonus in year 1 and the contract is spread over the 5 years (in a 5 year contract)

Why are hotel taxes a popular way to fund facilities - They export the tax - They raise enough money to pay for the facility without additional taxes - It has vertical equity but not horizontal equity - All of the above

- They export the tax

Why do many NBA and NHL teams share a stadium? How does this impact the NHL financially?

- They share stadiums because basketball courts and hockey rinks are similar in size and shape, multipurpose arenas can serve hockey and basketball teams with fewer constraints than stadiums that host both baseball and football teams - NBA teams have been the primary tenants of the arenas that they share with NHL teams, and hence have benefited much more from their facilities. That being said, hockey teams that are a secondary tenant generally face worse financial arrangements than the basketball team with which they share the arena with

1. Describe the negative externalities and how they can be corrected.

- Third party bears unintended costs i. Example: -- Pollution is a negative externality -- Spectators generate noise, overcrowding, pollution, and traffic congestion - This has a negative impact on innocent bystanders - The external costs are the health problems and inconvenience of those people who are affected by the noise, overcrowding, pollution, and traffic

Vertical equity states: - Those with the greatest ability to pay should pay first - Equals should be treated like equals - Those who benefit the most should pay - Add more taxes when there is a small deadweight loss

- Those with the greatest ability to pay should pay first

A contingent valuation is used primarily - To determine present value of a new project - To calculate the increase in revenues associated with the new stadium - To measure the value of a non-market goods - All of the above

- To measure the value of a non-market goods

A contingent valuation is used primarily - To determine present value of a new project - To calculate the increase in revenues associated with the new stadium - To measure the value of non-market goods - All of the above

- To measure the value of non-market goods

Canadian fans pay ticket and concession prices above most other American markets. True or False?

- True

If the Canadian dollar were still at par, the NHL revenue would be at least $100M higher. True or False?

- True

If the players combined salary is in excess of 50% of total revenue, then the players lose their escrow money. True or False?

- True

NHL owners lost approximately $74M in revenue from broadcasting due to the weak dollar. True or False?

- True

NHL players salaries are paid in US dollars. True or False?

- True

Uncertainty around the Canadian dollar was a factor in NHL discarding plans to put a team in Quebec. True or False?

- True

How many rounds is the competitive balance draft and when are these rounds held?

- Two Rounds: A and B --- Round A is after 1st round --- Round B is after 2nd round

In the NBA, a teams unsigned draft pick counts against the salary cap: - For one the length of the rookie contract - Until the player becomes an RFA - Until the player is signed - Until the player is drafted

- Until the player is signed

Which if the following does not promote competitive balance in the four leagues? - Revenue Sharing - Variable ticket pricing - Salary cap - Free agency - Draft

- Variable ticket pricing

Which of the following is true about the NBA and NHL sharing stadiums? - NHL teams are typically the main tenant - NHL teams have bene ted more financially than NBA teams - NBA teams are the main tenant an have financially bene ted more - Very few NHL teams share stadiums with NBA teams

- Very few NHL teams share stadiums with NBA teams

Under what conditions can you use the standard deviation coefficient to measure competitive balance across multiple seasons?

- You can use it to compare across seasons if: i. The # of games played has not changed (due to pandemic) ii. The # of teams in the league has not changed iii. No significant changes to the rules of the game (NBA adding 3 point line) iv. No significant changes to the CBA (collective bargain agreement) 1. Where revenue sharing and salary cap agreements are written. 2. Make footnote for changes if something has changed bc at that point you are not calculating the same product anymore.

Ramsey rule for efficient sales taxes states: - Increase a tax that creates a deadweight loss - The more inelastic the demand, the higher the tax - The higher the deadweight loss, the higher the taxes - None of the above

- the more inelastic the demand, the higher the tax

What is the binomial distribution and how does it apply to measuring competitive balance?

Binomial Distribution: 1. Only two possible outcomes in a fixed number or attempts 2. As number of attempts increase, distribution centers around the mean 3. The more games in a season the more competitively balanced the league becomes

Why study competitive balance?

Competitive balance matters to owners and the leagues in which they compete because it matters to fans, especially for teams that rarely win Leagues often adopt policies to promote competitive balance because individual teams lack the means or the motivation to do so Leagues and professional associations do not need specific action if they tend naturally toward equal strength, but otherwise, the league MUST create a more competitive environment

The fall of the dollar resulted in the seven Canadian teams revenue falling below break-even. True or False?

False

Why can't you use the standard deviation to compare across different leagues ( e.g. NFL vs. NBA)?

Problem: # observations (games) must be constant i. Applied to sports: 1. As the number of matches rises, winning percentages cluster around the mean 2. If teams are evenly matched, then the probability of success in any game is close to .5 3. In a short season, a lucky team can have all wins and an unlucky team no wins 4. The league can look unbalanced in a short season 5. As season gets longer winning streaks and losing streaks begin to offset each other.

In the context of market size and competitive balance, what are the three primary areas of disagreement?

What to use as a measure of success? (lions winning game, chiefs winning superbowl) How to characterize market size? (Population? Or tv market size?) How do we measure the impact of policies designed to alter competitiveness, such as revenue sharing? (salary cap, rev sharing, the draft, free agency)

How does economic profit differ from accounting profit?

a. Accounting Profit = revenue less expenses (explicit costs) b. Economic Profit = Revenue less all implicit and explicit costs

Why did the Dodgers move to L.A.?

a. Simple matter of economic profit i. Dodgers had a high accounting profit, but a lower economic profit (compared to LA) 1. 1.5 million fans in Brooklyn 3 million fans in LA