Question 1

The NHL negotiates with television networks for broadcast rights fees.The return in excess of the resource owner's opportunity costs in this instance is referred to as:

Accepted Answer

Economic rent refers to the return in excess of the resource owner's opportunity costs. In this case, the NHL negotiates with television networks for broadcast rights fees, and any excess return they receive beyond their opportunity costs can be considered economic rent.

Question 2

A market with only one seller is referred as a/an:

Accepted Answer

A market with only one seller is a monopoly, as there is a single firm selling a product with no close substitutes and has complete control over the market price.

Question 3

How have professional athletes responded to monopsony power?

Accepted Answer

Professional athletes have formed players' unions to exert monopoly power and negotiate for higher wages and better working conditions. This is seen in many sports leagues, such as the NFL Players Association, the NBPA, and the MLB Players Association. These unions have been successful in securing better contracts and benefits for their members, and have also been involved in collective bargaining negotiations with league owners.

Question 4

Of the 149 teams discussed in the chapter on the business of sport,only one has a black man as its principal owner.Which team?

Accepted Answer

According to the given information in the chapter on the business of sport, among the 149 discussed teams, only Charlotte Bobcats have a black man as its principal owner, Michael Jordan.

Question 5

A/An _____ is a market with only one buyer.

Accepted Answer

A monopsony is a market in which there is only one buyer for a product or service, while a monopoly is a market in which there is only one seller. A cartel is a group of businesses that collude to limit competition, and an oligarchy is a market in which a small number of large firms dominate the industry. Therefore, the best choice for a market with only one buyer is monopsony.

Question 6

Sports leagues achieve monopoly status by doing all of the following,except:

Accepted Answer

The statement is asking for an exception, and the only option that does not allow a sports league to achieve monopoly status is producing a heterogeneous product, which means that there are several substitutes for the product. The other options, preventing new competition, restricting output quantity and increasing prices, and agreeing on how to share monopoly power are all strategies that allow a league to establish a monopoly.

Question 7

How does the market power generated by professional sports leagues reduce consumer welfare?

Accepted Answer

Professional sports leagues often engage in cartel behavior by restricting the number of teams or franchises allowed in a particular league or geographic area. This results in a reduction in output, denying access to live professional sports to fans in cities that would otherwise be able to support a team. This reduces consumer welfare by limiting options for fans and potentially leading to higher prices for tickets and merchandise. Other options mentioned in the question - A, C, and D - either do not address the negative impact of market power on consumer welfare or are not accurate statements.

Question 8

A _____ is a group of two or more firms that formally agree to coordinate their production and pricing decisions to maximize joint profits.

Accepted Answer

A cartel is a group of firms that work together to reduce competition in a market by coordinating their production and pricing decisions to maximize joint profits. By doing this, they can drive up prices, limit supply, and control the market. Examples of cartels include OPEC (Organization of the Petroleum Exporting Countries) and the Diamond Cartel.

Question 9

The political economy of sport can be said to include all of the following,except:

Accepted Answer

The political economy of sport includes the study of production, consumption, and economic transactions; the relationship between law and government and economic transactions; and the distribution of wealth and income in economies. However, it does not typically involve an analysis of the internal workings of local sport organizations, so option D is the exception.

Question 10

Which of the following is TRUE of the reserve clause?

Accepted Answer

The reserve clause does exist today in North America, and it still limits players' ability to become free agents until they have played a certain number of seasons or met other criteria. This has been a point of contention between players and owners, leading to disputes and strikes in some cases. Options A, B, and D are all incorrect as they do not accurately describe the reserve clause.

Question 11

Which of the following best reflects price discrimination in professional sports ticket sales?

Accepted Answer

Offering a discount for students is an example of price discrimination as it allows a certain group to pay a lower price based on their characteristics (in this case, being a student).

Answer: B
 Charging higher prices for seats closer to the ice is an example of price discrimination as those seats are in higher demand and fans are willing to pay a premium for them.

Both A and B reflect price discrimination in professional sports ticket sales.

Question 12

The National Hockey League was established in 1917 with a total of four teams.These teams were in which of the following cities?

Accepted Answer

The National Hockey League was established in 1917 with four teams located in Toronto, Montreal, and Ottawa.

Question 13

Which of the following leagues/associations is currently the largest with 32 teams?

Accepted Answer

The NFL is currently the largest league/association with 32 teams. The NBA has 30 teams, the NHL has 31 teams, and MLB has 30 teams.

Question 14

The reverse entry draft format does all of the following,except:

Accepted Answer

The reverse entry draft format does not guarantee profits for the team.

Question 15

Joint venture cooperation by sports leagues is best seen in:

Accepted Answer

Joint venture cooperation by sports leagues is typically seen in facility development, where multiple leagues or teams may work together to build a shared facility or complex. Examples of this include the Staples Center in Los Angeles, which is home to multiple sports teams, and the Olympic Village used for various events during the Summer and Winter Games. While establishing a league schedule, rules and regulations, and determining a league champion are all important aspects of running a sports league, they are typically handled by the league itself rather than through joint ventures.

Question 16

North American sports franchises generate revenue from five sources.Which of the following is NOT one of these sources?

Accepted Answer

The correct sources of revenue for North American sports franchises are A, B, and D. International advertising is not a common source of revenue for these franchises.

Question 17

You are explaining to a friend the business of sport and note that _____ are the largest operating expense for each team in North American professional sports.

Accepted Answer

Players' salaries are the largest operating expense for each team in North American professional sports.

Question 18

In terms of U.S.millions of dollars,which of the following Canadian professional sports franchises is the most valuable?

Accepted Answer

According to Forbes' 2020 valuations, the Toronto Maple Leafs are worth $1.5 billion USD, making them the most valuable Canadian professional sports franchise. The Calgary Flames are worth $550 million USD, the Toronto Raptors are worth $2.1 billion USD, and the Edmonton Eskimos are not a professional sports franchise but a Canadian Football League team worth $20 million USD.

Question 19

Sports leagues undertake two types of cooperative action:

Accepted Answer

Sports leagues primarily engage in cooperative action through single-entity or joint venture structures. In a single-entity system, the league is considered a single business entity, and all teams are owned and operated by the league itself. In a joint venture system, the separate team owners work together to operate the league while maintaining independent ownership of their respective teams. Both forms of cooperation are used in various sports leagues around the world. The other options listed (B, C, and D) do not accurately describe the types of cooperative action undertaken by sports leagues.

Question 20

Which of the following does NOT exemplify a type of single-entity cooperation by sports leagues?

Accepted Answer

Merchandising arrangements involve multiple entities, such as teams and vendors, and do not exemplify single-entity cooperation. The other options involve the sports league as a single entity.

Quiz 13: The Business of Sport