ECO4199-takehome-work

ECO 4199 Take Home Exam - Fall 2023 Due: 5:00pm on 12/15/2023 This is a take home exam. Complete the exam on your own. Do not discuss the exam with anyone else. Submit your answers on Brightspace by the due date. Instructions: Answer the following questions. Show your work. The exam is worth 30 points. Question 1 (5 points) Why does market power result from territory definition and protection by owners acting as leagues? Provide a nonsport example where such protection does not generate market power.What is the crucial difference between your example and a pro sports league? Question 2 (10 points) Consider the following league model: Where the demand for winning is: Large market team: Small market team: where and are the marginal revenues of large and small. Algebraically solve for the following equilibrium conditions: a) winning percentages ( ) b) price of talent ( ), c) the talent bills ( , ). d) Plot the two-team league model and label the equilibrium values. Round all values to 4 decimal places. Question 3 (5 points) Explain why each of the following remedies for competitive imbalance will or will not improve balance. a) Local gate revenue sharing b) The luxury tax c) Salary cap MR = L 90 − 90 W L MR = S 60 − 60 W S MR L MR S W , W L ∗ S ∗ P ∗ TB L TB S