Deck 6: The Public Finance of Sports: Who Benefits and How

Question 1

Benefits that spill-over to third parties not directly involved in the transaction are called:

A) Sunk costs.
B) Negative externalities.
C) Public goods.
D) Positive externalities.

Answer 1

D

Question 2

The additional noise, congestion and crime that can come from a new sports facility coming-in to a downtown metro area represent a____________________for the residents of the neighborhood where the facility is located.

A) Positive externality.
B) Negative externality
C) Profit boost.
D) Free-market equilibrium outcome.

Answer 2

B

Question 3

New baseball stadiums are smaller than they used to be because

A) baseball is less popular than it used to be.
B) baseball teams no longer share ballparks with football teams.
C) cities are becoming more careful about spending their money.
D) technological advances allow teams to seat more fans in a smaller space.

Answer 3

B

Question 4

Why is comparing "capacity utilization rates" (that is the percentage of seats sold, on average in a season) deceptive when comparing major league baseball teams across time and other teams?

Question 5

Economic rent means:

Question 6

From a purely economic standpoint, which condition would you expect to encourage a sports team to win more games?

Question 7

In Major League Baseball, after a new stadium is built, attendance tends to fall back to its original (i.e., "old" stadium level after approximately_______________years.

A) 20.
B) 5-8.
C) 10
D) 2

Question 8

A sports facility will cause a city's net exports to rise if:

A) It sells large amounts of merchandise at the facility.
B) It broadcasts it games to a nationwide audience.
C) Many fans from other towns now come to the city.
D) None of the above.

Question 9

Public goods are ___________________from a free-market system in which firms act out of the profit motive.

Question 10

The net economic impact of hosting mega-events such as the Olympics or Super Bowl tends to be relatively modest.

Question 11

What does it mean when economists say public goods are non-excludable and non-rivalrous in consumption.

Question 12

Walter O'Malley is infamous for

A) dressing like Al Davis.
B) moving the Dodgers from Brooklyn to Los Angeles.
C) mistreating his players.
D) None of the above.

Question 13

In the 1950s only a handful of teams played in municipal stadiums. Now, very few do not. Why?

Question 14

When there are positive externalities associated with a good or service, private markets tend to_____________________________them.

A) Overallocate.
B) Underallocate.
C) Efficiently allocate.
D) Completely ignore.

Question 15

With an MPC of .75, what would you expect to be the total impact on spending/incomes from the construction of a $10 million facility in a city?

A) $40 million.
B) $7.5 million.
C) $10 million.
D) Zero.

Question 16

Positive consumption externalities increase the demand and socially-optimal quantity consumed of a product.

Question 17

Teams can persuade host cities to build them new stadiums because

A) players are great at arguing for new stadiums.
B) they can always threaten to re-locate the team.
C) All of the above.
D) None of the above.

Question 18

The Green Bay Packers could threaten to leave the city of Green Bay because

A) they are privately owned.
B) they are a public corporation.
C) they are a municipal corporation.
D) None of the above.

Question 19

If the MPC is 0.5, the simple multiplier (ignoring leakages) is:

A) 0.5
B) 10
C) 2
D)5

Question 20

Baseball stadia built in the early years of the 1900s were usually built in the center of town.

Question 21

In which sport do attendance levels fall back to previous levels the soonest after a new facility is built?

A) Hockey.
B) Baseball.
C) Basketball.
D) None of the above.

Question 22

Most economists view tax revenues raised through state lotteries as

A) progressive since rich people can afford to buy more tickets.
B) the best way to raise funds because no one has to buy tickets.
C) a poor idea since lottery tickets are inferior goods.
D) regressive since poor people spend a greater fraction of their income on tickets.

Question 23

What are the direct benefits from hosting a professional sports team?

Question 24

A city may make sizable operating revenues from leasing a venue to a team but still subsidize its team because

A) the city understates the multiplier effect.
B) the owner declares Subchapter S status for the franchise.
C) the city ignores opportunity costs.
D) the owner is caught in a prisoner's dilemma situation.

Question 25

If average annual household incomes increase by $5,000 and imports increase, on average by $400, what is the marginal propensity to import?

A) .20
B) .08
C) $400
D) There is not enough information to determine.

Question 26

What are the indirect benefits from hosting a professional sports team?

Question 27

Logrolling can improve upon majority rule because

A) it protects minority rights.
B) it imposes the appropriate tax.
C) it offsets the winner's curse.
D) it allows for the intensity of desires.

Question 28

What do cities hope to gain by attracting franchises?

Question 29

Explain what sports economists mean when they speak of the crowding-out effect of a new sports facility.

Question 30

A small town is likely to have a smaller multiplier effect because

A) so much expenditure leaks out to surrounding towns.
B) professional athletes are less likely to want to live there.
C) the direct benefits of a professional franchise are smaller.
D) fewer franchises locate in small towns than in large cities.

Question 31

Advocated of revisions to $500 million renovations to Wrigley Field in Chicago argue that the renovations will generate over $18 million in additional spending per year. Why will the true net economic impact likely be far less than $18 million per year?

Question 32

Why is the multiplier effect for the local economy likely to be greater for the Los Angeles Lakers than the Sacramento Kings even though both are NBA teams?

A) The L.A. Lakers have historically been more successful on the basketball court than the Kings and demand for tickets will be higher if a team plays well.
B) Because L.A. is a larger metropolitan area, the Lakers will likely have to share more in local revenues with the league than the Kings.
C) The Lakers sell out more games than the Kings meaning that ticket sales for the Lakers are mostly limited to local season ticket holders.
D) The Lakers' players are much more likely to live the in the city in which they play than Sacramento's players.