Business economics & sports

You may answer any of the following questions up to a maximum of 100 possible points. There is no requirement that you answer any questions. You may also choose to answer one, two, or three questions. Each question is worth 25 points.

You may consult books, class notes, web sites.  You may not consult other members of this class.  Doing so will result in a zero for this exam and an academic integrity report.   Cite all sources you use for data or ideas, including the textbook.  (This is for your protection.)

When preparing your answers, assume you are answering someone who is reasonably intelligent, but unfamiliar with the course or its content.  Fully explain the concepts you are discussing.  Demonstrate to me what you understand.  In grading essay questions, you start with “zero,” and I add points as I read your responses.  There are certain, basic principles that must be discussed, but the highest grades will be awarded to students with complete answers, especially those providing unexpected (but economically correct) insights. 

There is a page limit.  You may submit no more than 5 single-spaced, typewritten pages.  This is not meant to indicate that you need to fill an entire page to answer a question well.  Quality is more important than quantity. 

• Economists usually argue that price is the best way to allocate scarce goods (like tickets to popular sporting events). That is, price should rise or fall, depending on supply and demand, until an equilibrium is reached. Everyone who is willing and able to purchase a ticket will then be able to do so. It is often the case with sporting events, however, that price is set below the “market-clearing” level so that shortages develop. (More people want to buy tickets than there are tickets available.) We discussed three alternative methods other than price for allocating scarce tickets. Identify these and discuss the pros and cons of each.

• Choose a team (any sport) that has performed poorly over the past several years. Explain why continued poor performance might reflect profit-maximizing behavior by the team owner. Include information about the team’s record and/or standing over the period you’re discussing.

• We discussed how competitive pressures in monopolistically competitive and even oligopolistic industries lead firms to increase costs until extranormal profits are competed away. Explain how continued subsidies for athletic departments at most universities (even the most successful) illustrates these competitive pressures.

• In most cases, professional athletes are not actually sending all those tweets. The athletes (or their agents) pay people to tweet for them—at least part of the time. What economic theory best explains why athletes don’t do their own tweeting?  Explain.

• Form a hypothesis regarding one of the following relationships. You may apply your analysis to any league you choose. Specifically, does A cause B? Explain why or (if not) why not. What other factors might be important. Then use data from the most recent year to test for correlation. (Do the two variables move together?) Include your data and a graph.

• Does (A) team success (number of wins) lead to (B) increased market value for the team?
• Does (A) higher payroll lead to (B) more success (number of wins)?