HW 3 solution(1) - Homework 3 1 Draw a graph that shows the...

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Homework 3 1. Draw a graph that shows the demand for seats at an NFL stadium. Show how demand for attendance at a given game would be affected if: a. The prices of parking and food at the game increases b. Televised games switch from free TV to pay-per-view only c. A new league forms with a team that plays nearby d. The quality of the team decreases dramatically e. The length of the season is increased. (a) Increase in the price of a complement; demand shifts leftward. (b) Increase in the price of a substitute; demand shifts rightward. (c) Decrease in the price of a substitute (as the new league decreases the cost of viewing an alternative game); demand shifts leftward. (d) The quality of the good falls, and fans’ taste for seeing the team declines. Demand shifts leftward. (e) The availability of possible games increases, creating more substitutes for each individual game; demand shifts leftward. 2. True or False, explain. If all teams are of equal quality it doesn’t matter whether they share gate receipts or not – revenue will remain unchanged. False. Revenue for each team is determined by more than simply team quality. For example, teams with the biggest venues will receive more revenue from home games if they do not share gate receipts than if they do. Conversely, small venue teams will benefit from revenue sharing, as they stand to gain a share of the larger gate receipts enjoyed by other teams. The same holds true for market size. Large market teams that have high average attendance figures will be net losers under revenue sharing.
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