Answered: Do sports teams show profit…

Do sports teams show profit maximization behavior or do they tend to incline monopoly pricing? As a result of that discussion, how would you treat these entities: Firm or club? Please explain.

Microeconomics A Contemporary Intro

10th Edition

ISBN:9781285635101

Author:MCEACHERN

Publisher:MCEACHERN

Chapter15: Economic Regulation And Antitrust Policy

Section: Chapter Questions

Problem 5QFR

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Question

Do sports teams show profit maximization behavior or do they tend to incline monopoly pricing? As a result of that discussion, how would you treat these entities: Firm or club? Please explain.

Definition Definition Market structure in which a single company dominates the entire industry. In a monopoly market, there are no close substitutes for the goods and services offered by the monopoly.

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In North America, although sport teams have monopoly power, but they do not profit maximize. Outline reasons why they do not profit maximize on their ticket sales. Provide 5 bullet points.
What membership fee would maximize profit for the club? Compared to the profit of a similar but single-price monopoly golf club, how much more profit does Northlands Golf Club make?
One of the reasons that the move of the Oakland Raiders to LA was blocked by the NFL was: The Raiders had a contract with the city of Oakland that still had five years left on it It would infringe on the monopoly of the LA Rams Oakland residents had signed a petition with over 100,000 signatures protesting the move. A majority of players on the team had not endorsed the move
Is it price discrimination when a professional football team charges, say, $150 per ticket for 50-yard-line tickets in the lower deck and $50 per ticket for upper-deck tickets overlooking the end zone? Why or why not?
In many large U.S. cities, monopoly owners of sports franchises have been lobbying local governments for new publicly financed sports stadiums. Is this a form of rent seeking? - Is there convincing evidence of rent seeking? - How does that relate to the welfare cost of monopoly?
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A monopoly sells Frisbees to two customer groups. Group A has a downward-sloping straight-line demand curve, whereas the demand curve for Group B is infinitely elastic. Draw the graph determining the profit-maximizing discriminatory prices and sales to the two groups. What will be the price of Frisbees to Group B? Why? How is the price to Group A determined?
The ultimate determinant of monopoly power is the firm’s elasticity of demand. What three factors determine a firm’s elasticity of demand? The ultimate determinant of monopoly power is the firm’s elasticity of demand. What three factors determine a firm’s elasticity of demand?
Topic B Problem: When the Edmonton Oilers built a new arena, Rogers Place, they claimed that they raised ticket prices to cover the higher costs associated with the new stadium. If the Oilers are profitable, should the extra costs from a new arena be responsible for raising ticket prices? If your answer is no, explain why ticket prices rise after building a new arena. To keep the Topic B problem simple, assume the Oilers are a monopoly in their market and assume there is only one ticket price. Hint: determine if a new arena is a fixed or variable cost.
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