Deck 11: The Economics of Amateurism and College Sports

Question 1

Why do college coaches of big time programs have the ability to void their contracts and join another school after relatively short periods of time?

Answer 1

Coaches have an escape clause built into the contract which enables them to entertain better offers if they should arise.

Question 2

Why might the cost of a football program be overstated?

Answer 2

One of the major costs of a college football program is the cost of scholarships. However, evaluating a scholarship at its dollar value may overstate the true cost to the university. The scholarship represents the cost the athletes would have had to pay to attend the university in the absence of the scholarship, or if the scholarship athlete displaces a paying student. Since most universities can accommodate additional students at relatively little cost, the true cost of the scholarship athlete is considerably smaller than the dollar value of the scholarship.

Question 3

Use human capital theory to explain why graduation rates for women's basketball players are so much higher than those for men's basketball players.

Answer 3

Since both the opportunities for playing professional basketball and the potential salaries that may be earned are so low for women vis-à-vis men, the opportunity cost of staying in college for a star male basketball player is much higher than for a star female basketball player. Thus, ceteris paribus, the star male basketball player is less likely than their female counterparts to be willing to incur the (on average) higher opportunity costs of staying in college.

Question 4

The economic theory of bureaucracy states that athletic directors

A) spend too much because they are preoccupied with profits.
B) spend too little because they are preoccupied with profits.
C) spend too much because they lack a profit motive.
D) spend too little because they lack a profit motive.

Question 5

Explain why college athletes face similar constraints to professional baseball players that had once been bound by the reserve clause.

Question 6

The NCAA imposes the "death penalty" by

A) dismissing a school's entire coaching staff.
B)prohibiting a school from offering any athletic scholarships.
C) prohibiting a school from playing members of the NCAA.
D)forcing a school to eliminate the sport.

Question 7

The NCAA operates as:

A) An illegal cartel.
B) A profit-maximizing cartel.
C) An incidental cartel.
D) An administrative liaison between collegiate amateur and professional sports.

Question 8

Why have schools like Florida State or Michigan State placed such an emphasis on athletics?

Question 9

Our code of Olympic Amateurism stems from

A) the Ancient Greek Olympic Games.
B)the American Populist Movement of the late 19th century.
C) a Frenchman who loved the 19th century British Aristocracy.
D)German desires to build a master race based on Greek ideals.

Question 10

In Clotfelter's 2011 study of athletic department revenue from 98 state universities______________percent comes from live ticket sales:

A) 90%
B) 10%
C) 35%
D) 25%

Question 11

What was the 2.0 rule?

Question 12

Describe the utility function of a football player at a big time football school.

Question 13

Since the NCAA works effectively as a monopsony, one would expect them to:

A) Pay lower wages than if they operated under perfectly-competitive labor market conditions.
B) Hire fewer works than if they operated under perfect competition.
C) Generate deadweight loss to society.
D) All of the above.

Question 14

Describe the utility function of a coach at a big time football school.

Question 15

Explain why athletic directors do not seek to maximize profits.

Question 16

The notion of a "student-athlete" was developed in order to

A) assert the primacy of education.
B)eliminate under-the-table payments to athletes.
C) keep athletes from filing for workers' compensation.
D)prevent gambling scandals.

Question 17

If big-time athletic departments continue to lose money why do schools continue to have big-time athletic departments?

Question 18

The typical problem faced by a cartel is the incentive for its members to overproduce. Explain why this is not a problem in the NCAA.

Question 19

Which of the following are considered positive externalities (spillovers) from collegiate athletics?

A) Collegiate athletics benefit "the greater good" in their community.
B) Increased admissions applications.
C) Increased donations and state funding.
D) All of the above.

Question 20

What positive externalities do college football and basketball programs provide to the NBA and
the NFL?

Question 21

Athletes in the original Olympic Games of ancient Greece were prohibited from receiving any financial compensation (either directly or indirectly) from their athletic endeavors.

Question 22

The shift to "two-platoon football" was a way for

A) professional teams to turn profits into losses.
B) colleges to exploit "student-athletes."
C) the NFL to exert monopsony power over its players.
D) colleges to spend increasing revenues.

Question 23

As a share of total economic activity in the local economy/university, an average university's athletic department exceeds that of the 5 professional sports franchises in Chicago.

Question 24

Explain how Thorsten Veblen, in his famous work from 1899, Theory of the Leisure Class, viewed the approach to sports taken by the upper classes.

Question 25

Describe the findings of Robert Brown's study of the MRP of premium college football players (i.e., those with the potential to play in the NFL) during their time in school.