KNH 313 Exam 3

monopolist hire ____ workers and pay ______ wages due to ___________

1. fewer 2. lower 3. lower competitive pressure

Because we deal with monopolies we have to recognize that the _______________ for this market lies ______ the MRP curve for a ___________________

1. marginal revenue product curve 2. below 3. truly competitive market

If nike adds 20 more units of Air Jordans per additional worker that can be sold for $100 each the marginal revenue product is

20x $100 = $2,000

What fraction of athletic department revenue do ticket sales make up

25%

How long does it take for a player to gain unrestricted free agency

4-7 years of service

What is the average percentage of a team's revenue paid to a coach

5.2%

Consumer discrimination and salary discrimination was prevalent in the NBA in the _____

80s but eased towards the end of the century

Describe the representation of A. Americans and Latinos in the MLB

AA - underrep. as catchers and pitchers overrep- in outfield Latinos overrep - middle infielders

After factoring out allocated revenues, which schools do not generate profit from athletic departments

All non-bcs schools

The NCAA used to forbid schools from making distinctions between aid given to student athletes and regular students, what do they do now

Allow athlete scholarships regardless of financial need or academic merit

What is the "gentlemen's agreement" or Rozelle Rule, which came into effect after the reserve clause was banned, is it still in effect?

An agreement to not pursue players from other teams THe commissioner had unilateral power to award compensation in the form of players or draft picks to the team losing a player Rule lasted until 1992

Describe how the NCAA is a cartel in relation to a monopoly

As a monopoly, Can tell its member clubs to use their power to control output

The law of diminishing returns says firms are less willing to pay additional workers, why is that?

Because of the loss of marginal revenue product

Why do monopsonies have to pay higher prices for all items

Because there are no other buyers to compare prices with

How does the NCAA minimize expenditures on athletes

By reducing the number of employees and level of pay below the competitive level

What two inputs do organizations use to produce one output

Capital and labor

Who is usually a state's highest paid employee

Coaches at public schools often above government officials and college presidents

Why is economic discrimination prominent in monopsonies

Employers are not driven out of the market because they are the market

How was salary caps impacting the payroll between teams

Equalized payroll between teams in leagues that use salary caps unlike the MLB which doesnt use salary caps

T/F schools with better athletic programs attract a smaller application pool

False, better athletic programs attract deeper applicant pool this allows more admissions revenue or be more selective

T/F different leagues have the same requirements for free agencies

False, different leagues have different requirements

T/F the NCAA acts as an efficient cartel by allocating greater benefits to its least efficient members

False, the NCAA allocates greater benefits to its most efficient members

What two sports bring in the most money

Football and men's basketball, most other sports bring loss of profits

What is final offer arbitration and who uses it

Forces arbitrators to pick one of the proposals from the team/player to encourage parties to make a deal before arbitration MLB uses final offer arbitration

Alan Eagleson

Former NHL agent/ director of NHLPA charges with 34 counts of fraud, racketeering, and embezzlement

Who is John Nash?

He developed a model that found that bargaining power comes from a party's ability to walk away from the bargaining table

The olympic games in 776 BC Greece were used as a way to replace what?

Heroism on the battlefield due to an absence of war

What sports leagues can pursue arbitration and binding arbitration

MLB and NHL

Do MLB players have restricted free agency

MLB players do not have restricted free agency, but like NHL players they have salary arbitration

what is the formula for marginal revenue product MRP

MRW x WINS

Do bonuses count against the salary cap in the NFL

Many bonuses do, unless prorated across the length of an entire contract some bonuses may not count such as performance incentives

Whether an athletic department is profitable or not depends on accounting practices, what schools typically see a profit?

Most BCS level schools even when you do not count generated revenue

What sports leagues use salary caps

NFL NBA NHL MLS

What was a big difference between the NFL and NBA in the 2011 agreement

NFl was flushed with money, NBA struggling NBA owners won NFL owners and players both received good settlements, smaller salary cap but higher salary floor

Does the NCAA offer scholarships to division III athletics

No athletic scholarships are offered to division III

Looking at generated revenue, are most school's athletic departments profitable

No, less than 30% of schools see a profit from generated revenue

How does final offer arbitration benefit players and when are MLB players able to use it

Often leads to increase in salary players with 3 years of experience can use this

How many of the title IX prongs must a university meet

One prong

What caused the 2004-2005 owner lockout in the NHL

Owner demands for a salary cap

How was the NHL owner lockout in 2004 resolved (3)

PLayers share of hockey related revenue increases as that revenue increases player's salaries face max deal limitations escrow tax to manage salary cap limits

African americans in the NFL have been underrepresented in QB, C, and TE positions where have they been overpresented

RB, WR, CB, S

If college athletics typically lose money, why are universities eager to subsidize them?

Seen as public good financial spillovers looked at as more than just profit

What are the profits from sports programs called even though a university is a non profit

Surpluses

What league started salary caps and why did they do this

The NBA salary caps were needed to control costs as revenues sagged

What was created to avoid exploitation and enhance education and morals for student athletes

The NCAA

How is the sport player association a hybrid type of union

The SPA encompasses the unified trade skills of a craft union and the collective bargaining power of an industrial union

What happens if an owner/GM has a taste for discrimination

The demand for players of a non-discriminated group may increase leads to higher wages for that group causes negative effect financially on team, but they maximize utility

What does the collective bargaining in the sport player association deal with

The framework in which players/agents negotiate with teams DOES NOT deal with wages

What happens to players who are not eligible for free agency

They only receive a fraction of their MRP thanks to the monopsony power of clubs

How does the NCAA enforce their monopsony power over student athletes

Through transfer restrictions

T/F many want NCAA schools to have competitions that reflect a Greek Olympic ideal of amatuer competition

True, but college athletics still remains a past time not profession

T/F Player opportunities are free from discrimination in sport but not for management

True, in most evidence

proportionality

WIthin 5% each way, percentage of women participating in athletics should reflect the number of women undergrads at a university

How is a bilateral monopoly resolved?

When both sides eventually negotiate for a wage between the ideal union wage and monopsony wage

Do alumni donations contribute to athletic department revenue?

Yes, they make up about 22%

Prejudice

a feeling or emotion

industrial unions

a rebuke to harsh working conditions, often met with backlash from employers

where does the marginal expenditure curve lie

above the supply curve mirrors what we see with monopolies

APR system

academic progress rate that tracks progress towards graduation and punishes schools with low marks

profit maximizing firms

adding enough workers so that the marginal benefit equals the marginal cost

human capital depreciate with

age and inactivity

What are some other things sport unions negotiate other than salary

age limits and disciplinary power this leads to more conflict

Numerous conferences have voted to _____________ up to the cost of attendance for athletes

allow aid

restricted free agency

allows teams to match the offer of a potential signing teams with their right of first refusal

Discrimination

an action

In auto racing, bigger differences in payouts in racing work as

an incentive for better driving performance

luxury taxes

an incentive to reduce payrolls taxes distributed to general player benefits and sport growth funds and not on-paying teams

Binding arbitration

arbitrator's ruling must be accepted

Describe how the NCAA is a cartel in relation to a monopsony

as a monopsony, can use market power to control its inputs

Salary discrimination has diminished but consumer discrimination has still been seen in what sports

baseball and basketball

Why is the marginal expenditure greater than the cost of additional purchases for a monopsony

because monopsonies spend more on the marginal unit and all preceeding units

Although there is a lack of serious rival leagues, rival leagues still lead to

bidding wars for players , increasing salaries challenging monopsony power

How have big schools enhanced arenas to capture more revenue

by adding luxury boxes and selling off naming rights to venues

How are APRs calculated

by awarding a student athlete one point for remaining enrolled and one point for remaining academically eligible divide actual APR points by maximum

firms use a fixed amount of capital, how is output changed

by changing the labor input

How does the NCAA act as a cartel enforcer

by having restrictions on player benefits

Describe how the NCAA is a cartel

can drive up prices on outputs and drive down costs on inputs

How do cartels allocate the greatest share of out and profit

cartel share output and profit to more efficient members

What is an example of a diploma mill

charter and private schools that focus on athletics more than academics

3 + 2 rule

clubs could only start 3 foreigners and potentially two more who had lived in the country long enough

how do industrial unions increase wages

collective bargaining

Why has gate revenue importance decreased

conferences sign increasingly lucrative television deals

What is the most harmful type of discrimination

consumer discrimination

as athletes try to reach the top...

costs become much more severe

what are two types of unions

craft unions industrial unions

what are some negatives of unions

create inefficiency stifling employment and production

As craft unions increase wages which way does the labor supply curve shift

curve will shift left

The importance of gate revenue has ________

decreased

Lower roster limits

decreases total employment but with wages rising jobs are harder to come by but are better compensating

Roster limits have an effect on

demand and wages

What was the end result of the reserve clause

depressed wages and players taking offseason jobs to make ends meet

Cartel style monopolies (NCAA)

determine level of output that maximizes profit, allocate output and profit amongst member

if you keep adding labor the marginal revenue product curve will ______

diminish downward slop

What might level level coaches do to some groups due to inherent biases

discourages groups from playing positions

monopsony drives ______ prices paid to workers

drives down prices

IF you only count generated revenue the number of profitable athletic departments will _______

drop tremendously (less than)

where do colleges get a split of TV revenue from

either their conference or the NCAA

Studies show that wage differentials based on race have been _______ in the NFL/NBA/MLB in recent years

eliminated

physical capital is easily transferable, but human capital is..

embodied within specific persons

What are the two major issues advocated for economic discrimination

equal access to work equal pay for equal work

Profits are maximized marginal benefit _______ marginal expenditure

equals

what is economic discrimination and what are the three types

equals are treated unequally 1. employers 2.employees 3. consumers

T/F becker's theory of labor discrim. focuses on psychological-sociological root causes of discrimination

false, becker focuses on behavior rather than psychological

T/F measuring units of labor in hours is very possible in the sports industry

false, it is impossible to measure labor in hours for sports

T/F Absolute performance is easier to judge than relative performance

false, relative performance is easier to judge because subjective measures of quality are needed

T/F the NCAA is the only intercollegiate athletic regulatory body

false, the NCAA is just the biggest

What does it mean that sports markets are perfectly competitive

firms are unable to affect the market price of output

training is done in either a ________ or ___________ sense

general or specific

Unlike professional sports, distribution of revenue from athletics not TV in college athletics is _______

hardly equal

how do firms maximize profit

having marginal revenue = marginal costs

if a monopsonist wants to buy more will they pay a higher or lower price

higher price

What does a higher MRP justify?

higher wages

What were some of the perks olympic champions received besides an olive crown in ancient greece

honors, favorable marriages, free food, cash, ability to train full time almost defeated the concept of "amateurism"

What sport can women and men both compete in equally but women still have fewer opportunities

horse racing also non-drag racing

What do "regular" output supply curves measure in

hours price per hour of output

The 1980s NBA boom shows that as demand for product labor increases (increase in fan base), the value of player labor will

increase players are not being more productive, but fan base values them more

Investing in human capital can lead to

increased productivity

income effect

increased wages equals increased purchasing power workers may buy more leisure and work less due to increased wages

Specific training

increases productivity in a specific context

General training

increases productivity regardless of setting

What are three examples of owner's power on salary caps thanks to collective bargaining in the NBA

individual max for contracts based on experience 10% escrow tax on salaries decline in player share of revenue

What sports for women have fared better when looking at wage discrimination

individual sports

allocated revenues

internal transfer within the institution from sources outside of athletics to the A student activity fees, expense payments, government support

for individual sports, relative productivity matters instead of absolute productivity, what does this mean?

just be better than your opponent, even if you don't play well

Teams need ____ to maximize profits

labor

what is an example of specific train

learning a specific team's playbook

What is an example of general training

learning rules of the game how to pass a ball

During a contraction, the demand curve for player labor shifts to the ____when a decrease in wages occur

left player unions are against contraction

How do craft unions increase wages

limiting access to the union and skills and assign members to employers

General training improves skills, why is this not valuable to a team

little incentive for teams to develop raw talent if players can just move to another team

What is an example of investing in human capital

little league baseball

lockouts

management does not permit labor workers to operate

What is a negative of title IX that occurs as programs try to adjusts budgets

many men's teams have been cut to accommodate women's programs

What is a benefit a worker's wage brings to a company

marginal revenue product

more productive workers = increase in __________

marginal revenue product and labor demand curve to shift to the right

MRP = MRW x WINS what is MRP

marginal revenue product for a certain player

monopsony

market situation where there is one buyer for a good or service

what is the supply curve for a monopsony

market supply curve (mirrors what we see with monopolies)

monopolies restrict output to

maximize profits

Describe the odds of making it as a pro athlete

microscopic NCAA seniors in revenue sports have a 2% chance of making it

when a strike occurs, workers become the _______ in the labor market

monopolist

bilateral monopoly

monopoly unions confront monopsony employers

Why was the BCS born

more broadcasting money need more pressure for games money in top handful of bowls increasing to a great degree but freezing out smaller school traveling to and playing in bowls is expensive, many teams in smaller bowls lost money

How do you calculate marginal revenue product

multiply the # of units add with one more worker by the price of a single unit

What are the regulations to be an FBS member

must sponser 16 varsity sports offer at least 200 scholarships (or spend $4 million on them) average home attendance of 15,000 over a two year period for football

the NBA's luxury tax revenue is distributed to ___________ and has increased markedly

non paying teams

What are negatives of APRs

not accurate measures of academic progress vast majority of schools punished are HBCUs with minimal resources to help athletes out

MRP = MRW x WINS what is WINS in this formula

number of additional wins that can be attributed to this player

What are player associations "unions"

orgs of workers who agree to act collectively to improve wages and working conditions

bosman ruling

outlawed the 3+2 rule brought free agency to european soccer players under contract still privy to transfer fees, payment from one team to another to sign a contracted player

Low salaries in minor leagues count as

payment for training

taste for discrimination

people may act as if thet are willing to pay to assoicate with one group rather than another

In a sport context what is labor

players

What NHL players can file for arbitration

players eligible for restricted free agency arbitrators will decide between proposals in 48 hours

unrestricted free agency

players sign with any team without any compensation

How is a college scholarship an investment inhuman capital

prepares student athletes for later life either as pro athlete or a regular worker

According to becker, what happens to profit maximization because we measure through utility maximization

profit maximization may not be the main goal for certain organizations some sacrifice profit to not have to associate with a group

Which of the 3 ways that congress has provided to maintain compliance with title IX is used the most

proportionality

what are the three ways congress provides to maintain compliance to title IX

proportionality program expansion accommodation interests

the slope of the marginal cost of effort rises dramatically as

quantity of effort increases

What do union supporters believe a positive working relationship with management can foster

reduced conflict and increased efficiency

thanks to the reserve clause, If teams and players cannot agree to a new deal owners could do what

renew for one more season under the same team as the last contract

How does the UEFA discriminate against teams

requires all clubs in the EU to have eight "home grown" players developed in the nation the club resides in

north american sport labor markets all deviate in certain ways from a fully competitive model what are three examples of this

reserve clause/free agency salary suppression salary caps

during an expansion, the demand curve for player labor shifts to the _______ as an increase in wages occurs

right

frequency

right of a player to sign with any team offering a contract

What is a counterweight for free agency to keep payrolls from spiraling out of control

salary caps

What is a huge expense for athletic departments

scholarships

program expansion

school must show it has increased and continues to increase opportunities for the underrepresented gender

accommodation of interests

school must show they've met the desires of the underrepresented sex

Name an example of a craft union

screen actors guild

What is a negative of the term student athlete

seen as an invention to avoid worker's compensation claims student athletes must sign agreements denying they are being paid for athletic performance to get a scholarship

In labor markets workers ____ their services to just one employer

sell

Individual players offer their ____ to teams to maximize their utility

services

craft unions

skilled artisans coming together to prevent others coming gin to undercut prices

Does the NBA have a soft or hard cap on salary

soft cap

In auto racing, which revenue gaining method is more important prize money or sponsorships

sponsorships

What is another word for positional discrimination

stacking

In a sport context what are some examples of capital

stadiums equipment

What is Title IX

step towards gender equity in sport in the US

Why is statistical discrimination bad

stereotyping based on incomplete information danger of creating self-fulfilling prophecies

What are examples of the NCAA's academic standards

students must hit certain targets for SAT/ACT scores and high school GPAs to quality to compete as freshmen once enrolled student athletes must make satisfactory progress towards a degree after 2/3/4 years

What happens when a team falls under 930 APR

subject to penalties public reprimand loss of scholarships and practice time postseason bans lose division 1 status

as wages rise, workers are subject to ________ & _____________

substitution effect income effect

role discrimination

systematic steering of minorities to specific positions on the field and within coaching ranks

What did the reserve claues inspire players in MLB to form

the MLBPA major league baseball players association thanks to the collective bargaining agreement

Although the labor supply curve looks like a typical supply curve, what is on the horizontal axis

the amount of output provided

While athletic success increases a school's application size, what does it not increase

the aptitude of the student body (increase candidate size, but not intelligence level)

Marginal expenditure

the cost of buying "a little more" greater than the cost of additional purchases

marginal revenue product

the extra revenue generated by one worker

What revolution opened up sport for consumption and participation to the working class

the industrial revolution this upset the aristocracy

As demand and value rises for player labor the labor demand curve will shift in which direction?

the labor demand curve will shift right

Worker's Wage

the marginal cost of one more hour of labor

Why is consumer discrimination so harmful

the market does not eliminate it over time sometimes promotes it instead if it allows organizations to maximize profit harms groups discriminated against without harming those who have a taste for discrimination

rank order tournaments

the order of finish is the sole performance criterion

Regarding discrimination, what do economists typically focus on

the outcome of discrimination instead of the causes

Why does specific training benefit a team

the player is most valuable to a current team

Although the labor supply curve looks like a typical supply curve, what is on the vertical axis

the price per unit of output

What caused players to stop breaking contracts in the middle of baseball seasons

the reserve clause

human capital

the set of skills that contribute to a person's productivity

If there is an upward sloping labor supply curve what does this mean

the workers respond to higher wages by offering more hours of work to employers

Does athletic success tie in to general donations to a university

there are mixed results schools with higher academic reputations are not usually affected by performance in athletics

What is the value of each side's alternative activity during a bilateral monopoly

threat point the side with the more valuable threat point generally has more bargaining power

How does the NCAA regulate behavior and punishments

through sanctions of TV appearance bans scholarship losses postseason bans "death penalty"

generated revenue

ticket sales, media rights deals, booster money, and anything else directly as a result of athletics

What are two positives for bowl championships

tourism vehicle for cities used to keep regional teams in market

T/F expansion and contraction of leagues (establishment/disestablishment of rival leagues) affects player demand

true

T/F the substitution effect is stronger than the income effect

true higher wages = more workers supplying more labor

T/F MLB teams that integrated sooner performed better on the field

true, integration = improvement english soccer was slow to integrate but those that did tended to win more

T/F the MLB has a strike or lockout every time a CBA comes up for renewal

true, a strike has occurred before each CBA renewal all four leagues have experienced work stoppages

T/F Players are homogenous inputs

true, players are homogenous inputs

What incentivizes athletes to do their best to win in an individual sport

uneven distribution of prizes

What is one reason that unions cause owners to move jobs overseas

unions advocate for increased wages increased wages = increased costs for owners

collective bargaining

unions meet with employers to produce agreements dictating wages and working conditions

name an example of an industrial union

united auto workers

Why does Becker's theory believe less discriminatory employers will be more successful than discriminatory employers

unprejudiced employers can undercut prejudiced ones by paying higher wages to groups being discriminated against this cuts into the profit margin of prejudiced employers

The labor supply curve has an _____ slope and looks like a typical supply curve for any other product

upward

statistical discrimination

using "group" averages to judge individual productivity levels

MRP = MRW x WINS what is MRW

value of an additional win to a team

What did the USWNT file litigation over

wage discrimination

Monopsonies suppress _______ and lower employment as compared to true competitive markets

wages

Law of diminishing returns

we start losing marginal revenue product by adding new workers firm is less willing to pay these additional workers

what typically dictates where a contractzone is

whatever leverage one party holds over the other

contractzone

when both teams and owners meet in the middle for terms that are acceptable for both parties

When does optimal club size occur

when marginal benefit of admitting a new member equals the marginal cost

When do monopsonists stop hiring workers

when marginal revenue product equals marginal expenditure

labor strike

workers remove labor input from the production process

Substitution effect

workers substitute leisure for work, but it costs them wages, prompting many to work more for higher wages

Do small schools get the same amount as bigger schools in tv revenue splitting

yes small and large schools get the same cut

Are grants a part of an athletic departments budget? If so how much

yes, 14%