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summer hw1 - Sports Economics Homework#1 Due Wednesday May...

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Sports Economics Homework #1 Due Wednesday, May 18 Please write your answers on a separate sheet. For full credit you must include all your work, and it must be obvious from your work how you arrived at your answers. Answers to essay questions should be well-written, in complete sentences and concise, and they should make sense even if the reader has not seen the questions. 1) Refer to the following quote from the New York Daily News: http://www.nydailynews.com/sports/baseball/yankees/2011/05/10/2011-05- 10_captains_2_blasts_drive_3000_sales.html (May 10, 2011) While Derek Jeter 's Sunday revival in Texas did not provide total euphoria for those with a financial interest in the Yankees , it had to at least produce some sighs of relief. This has everything to do with the Captain's quest for 3,000 hits. Of course there's money at stake, money to be spread around here. There are many outstretched hands looking to get into your wallet. Jeter ain't the only guy who will be cashing in. There are many revenue streams. From marketing, to ratings on the Yankees Entertainment & Sports Network, to tickets, to memorabilia, to anything else the snake oil boys can peddle with Jeter's face on it, the number 3,000, and the Yankee logo - in no particular order. See, it's better for business to have the Captain smacking the baseball around rather than struggling, slowly dinking and dunking his way to 3,000 while facing daily cross-examinations about why he's not hitting like he used to. Or why he should be dropped in the lineup. Or what position he might be playing next season. Stuff like that puts potholes in the road to 3,000 glory. A road that's supposed to be smooth, paved with gold. The longer it takes for Jeter to reach 3,000, the more it becomes anticlimactic, more millstone than milestone. a) Define marginal revenue product (MRP) b) How is Derek Jeter’s MRP affected by his approach to 3,000 hits. Explain. Cite specifically which revenues will be affected and why. 2) Refer to the article NY voters to decide on plan for new hockey arena ; (printed below) http://www.signonsandiego.com/news/2011/may/11/ny-voters-to-decide-on-plan-for-new- hockey-arena/ Write a brief essay to address the following: a) What is a bond? How many bonds does the county propose selling? b) What is the opportunity cost to the county of a new arena if the bonds are paid with revenues generated by the arena? c) What is the opportunity cost to the county if the new arena does not generate enough revenues to repay the bonds? d) Name one sunk cost which the county should not consider in making the decision of whether or not to agree to the plan. Explain why it is a sunk cost. e) How will the new arena affect the MRP of the Islanders’ players? Explain.
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3) Consider the following regression: ATTEND = -.1185 – 28.1*PRICE + 289*WIN + 187*WIN -1 + .0378*POP WIN = a team's winning percent WIN -1 = a team's winning percent the previous season ATTEND = average attendance per game POP = population PRICE = average price per ticket What would projected attendance be for a team with the following: population: 780,000 average ticket price: $35
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