The Economics of Sports
6th Edition
ISBN: 9781138052161
Author: Michael A. Leeds, Peter von Allmen, Victor A. Matheson
Publisher: Routledge
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Chapter 1, Problem 3P
To determine
Explain the massive improvement in Brown’s kicking game.
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Firms A and B are battling for market share in two separate markets. Market I is worth $30 million in revenue; market II is worth $18 million. Firm A must decide how to allocate its three salespersons between the markets; firm B has only two salespersons to allocate. Each firm’s revenue share in each market is proportional to the number of salespeople the firm assigns there. For example, if firm A puts two salespersons and firm B puts one salesperson in market I, A’s revenue there is [2/(2 + 1)]$30 = $20 million and B’s revenue is the remaining $10 million. (The firms split a market equally if neither assigns a salesperson to it.) Each firm is solely interested in maximizing the total revenue it obtains from the two markets.
Compute the complete payoff table. (Firm A has four possible allocations: 3-0, 2-1, 1-2, and 0-3. Firm B has three allocations: 2-0, 1-1, and 0-2.) Is this a constant-sum game?Does either firm have a dominant strategy (or dominated strategies)? What is…
Suppose initially that the United States is consuming
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shirts, as indicated in the figure. Then, suppose the United States and Canada specialize by each only producing the good for which they have a comparative advantage and then trade. In particular, suppose the United States trades Canada half of its production for half of what Canada produces.
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Why do we use general equilibrium analysis rather than partial equilibrium analysis to study comparative advantage? Explain
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The Economics of Sports
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- 3. The relationship between marginal and average costs Consider the following scenario to understand the relationship between marginal and average values. Suppose Musashi is a professional basketball player, and his game log for free throws can be summarized in the following table. Fill in the columns with Musashi's free-throw percentage for each game and his overall free-throw average after each game. Game Game Result Total Game Free-Throw Percentage Average Free-Throw Percentage 1 8/10 8/10 80 80 4/10 12/20 3 2/8 14/28 4 2/4 16/32 6/8 22/40arrow_forwardSuppose there are two countries that are identical in their factor endowments. Both would like to consume both passenger cars and commercial vehicles, industries in which there are economies of scale. In the absence of trade, each country would have both industries. If they could trade, both could benefit by specializing and taking advantage of economies of scale to lower their costs of production. Assume that once trade becomes possible, country A specializes in producing passenger cars and country B specializes in producing commercial vehicles. Because of economies of scale, the cost of passenger cars relative to commercial vehicles is lower in country A than in country B. Explain why we would expect to observe trade in similar products, known as intra- industry trade, when production technology is characterized by economies of scales? Who are the winners and losers in this example? How does your result compare with that of the winners and losers in the CORE textbook example of the…arrow_forwardConsider an exchange economy with 2 agents and 2 goods. In an Edgeworth-Bowley diagram, show and illustrate that if both agents have the same preferences, the contract curve is a straight line from the bottom left-hand corner to the top right-hand corner. Does it follow that if the agents do not have the same preferences, the contract curve is not a straight line? Suppose the two agents have the same endowments and the same preferences. Is mutually beneficial trade possible? Illustrate in an Edgeworth Bowley diagram. State and explain Walras Law. What are the implications of Walras’s Law? Illustrate Walras Law in an Edgeworth-Bowley diagram.arrow_forward
- The following scenario examines the relationship between marginal and average values. Suppose Jelani is a high school basketball player. The following table presents their game-by-game results for foul shots. Fill in the columns with Jelani's foul-shooting percentage for each game and their overall foul-shooting average after each game. Game Result Total Game Foul-Shooting Percentage Average Foul-Shooting Percentage Game 1 8/10 80 2 14/20 3 15/25 4 18/30 5 26/40 FREE-THROW PERCENTAGE On the following graph, use the orange points (square symbol) to plot Jelani's foul-shooting percentage for each game individually, and use the green points (triangle symbol) to plot Jelani's overall average foul-shooting percentage after each game. Note: Plot your points in the order in which you would like them connected. Line segments will connect the points automatically. 100 90 80 70 60 50 40 30 20 10 0 8/10 6/10 1/5 3/5 8/10 0 2 GAME 3 80 4 5 Game Foul-Shooting Percentage Average Foul-Shooting…arrow_forwardThe following scenario examines the relationship between marginal and average values. Suppose Lee is a high school basketball player. The following table presents their game-by-game results for foul shots. Fill in the columns with Lee's foul-shooting percentage for each game and their overall foul-shooting average after each game. Game Result Total Game Foul-Shooting Percentage Average Foul-Shooting Percentage Game 1 8/10 8/10 2 4/10 12/20 3 2/8 14/28 4 2/4 16/32 5 6/8 22/40 80 80 On the following graph, use the orange points (square symbol) to plot Lee's foul-shooting percentage for each game individually, and use the green points (triangle symbol) to plot Lee's overall average foul-shooting percentage after each game. Note: Plot your points in the order in which you would like them connected. Line segments will connect the points automatically. FREE-THROW PERCENTAGE 100 90 80 70 60 50 40 30 20 10 0 0 2 3 GAME Game Foul-Shooting Percentage Average Foul-Shooting Percentage ? You can…arrow_forwardThe following table shows how much utility Taran gets from watching his favorite teams, measured in "utils" (units of satisfaction). Team Manchester United Seattle Kraken Seattle Mariners Seattle Seahawks Seattle Sounders Seattle Storm Utils 145 127 148 142 131 135 Suppose Taran can only watch one of his favorite teams play. Assuming the cost to watch each team is the same, which team will Taran choose to watch?arrow_forward
- Use the Fundamental Theorem of Exchange and draw Edgeworth Box diagrams to show the conditions necessary for an 'efficient' allocation of two goods between two individuals. Use this model to evaluate the statement: "If two individuals have identical endowments of both goods there are no possible gains from trade". Hint: you need to develop your explanation of the theory and the efficiencyconditions step-by-step. You need to draw several diagrams showing Edgeworth Boxarrow_forwardWhen countries specialize in producing certain goods and then freely exchange those goods for other goods with different countries, what is the advantage? Group of answer choices Each country can consume at a point outside their production possibilities frontier. All people in each country will be better off than they would be if they did not trade. Each country can produce at a point outside their production possibilities frontier. Each country can produce and consume at a point outside their production possibilities frontier.arrow_forwardCan you explain the Pareto principlearrow_forward
- How is willingness to pay determined by opportunity cost?arrow_forwardPA no Page 5 8. Pat and Kerry are considering a partnership. With all Pat's resources, Pat can produce 50 X or 20 Y. With all of Kerry's resources, Kerry can produce 30 X or 30 Y. Assume the resources can be easily substituted to make either product. They are starting by using half of the resources to make each item. These relationships are shown in the following table. Use this information to answer the following questions: Kerry Product X (Xylophones) Product Y (Yams) 50 0 Pat 25 Pat make? 10 0 20 Pat make? 30 0 15 15 0 30 a. Who has an absolute advantage in producing X? Pat b. Who is a comparative advantage in producing Y? Partnership be gained from before they started trading? c. If Pat and Kerry decided to take all the gains from trade in X, how much X would 40 25 d. If Pat and Kerry decided to take all the gains from trade in X, how much X would Gain be gained from before they started trading? e. If Pat and Kerry decided to take all the gains from trade in Y, how much Y would f.…arrow_forwardJefferson Franklin 1 wheat 1/2 cotton The table above shows the number of hours required to produce one bushel of cotton and one bushel of wheat for Jefferson and Franklin. If each person specializes according to his comparative advantage(s), a mutually beneficial price ratio would be = 1 wheat= 2/3 cotton 1 wheat = 0.4 cotton Cotton (per bushel) 10 hours 12 hours 1 wheat 1/3 cotton = Wheat (per bushel) 5 hours 4 hours raarrow_forward
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