2. We can express a sports franchise’s gate revenue (RG) as RG = Rh + (1-)Ra. Re

Question

2.    We can express a sports franchise’s gate revenue (RG) as RG = Rh + (1-)Ra. Regarding this expression,
    a.    Rh and Ra represent the marginal revenue product of players in home and away games, respectively
    b.    represents the percentage of gate revenue retained by the home team
    c.    Rh represents the franchise’s broadcast revenue and Ra represents its licensing revenue
    d.    RG = Ra if no revenue is shared


3.    A sports organization that successfully engages in price discrimination
    a.    will maximize profit in one market but maximize revenue in the other
    b.    charges a higher price to fans who exhibit greater elasticity of demand
    c.    charges a higher price to fans who exhibit lesser elasticity of demand
    d.    will operate such that MR > MC to maximize profit in each separated market


4.    We generally assume that sports organizations  
    a.    are perfectly competitive and thus face perfectly elastic demand
    b.    are perfectly competitive and thus face perfectly inelastic demand
    c.    are not perfectly competitive and thus face down-sloping demand
    d.    are not perfectly competitive and thus face perfectly elastic demand


5.    A sports organization that engages in inelastic ticket pricing
    a.    faces a U-shaped total revenue function
    b.    prices its tickets where marginal revenue is equal to zero
    c.    prices its tickets within the decreasing range of total revenue
    d.    earns the maximum possible ticket revenue

Explanation / Answer

2) Option D. When there is a sharing, a given percentage is retained. When there is no sharing, becomes zero.

3) Option C. For a successful price discrimination, the producer should charge a high price in market

that has lower elasticity and a low price in market with higher elasticity. This is because consumers

with low price elasticity of demand do not reduce consumption in proportion to price increase so that

revenue is increased

4) Option C. This is because they tend to posses market power. With that they face downward sloping

demand

5) Option C. When TR is decreasing, MR is falling and in this region, MR = MC.

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