Understanding the Economics of Sports: Suppliers, Externalities, and Labor Markets, Quizzes of Sport Marketing

Download Understanding the Economics of Sports: Suppliers, Externalities, and Labor Markets and more Quizzes Sport Marketing in PDF only on Docsity! TERM 1 Suppliers of Sport DEFINITION 1 Government, Community, Private TERM 2 Government DEFINITION 2 Primary function to service human needs.Can provide services regardless of citizens ability to pay.Are longstanding, established bodies.Has the power to regulate land- Can acquire land- Can regulate zoningCan bring together diverse groups within the community to maximize benefits.Without government intervention or regulation, private companies can conspire to restrain trade. TERM 3 Community DEFINITION 3 Sometimes known as voluntary organizationsRevenue comes from multiple sources: Membership dues, donations,sponsorship sales, government subsidiesReliant on volunteers: Participants themselves (main beneficiaries), former participants (former beneficiaries), families ofparticipants(indirect beneficiaries), Nonparticipant- related volunteers ( whoreceive benefits from volunteering.) TERM 4 Externalities DEFINITION 4 Externality ( or transaction spill over)- An economic side effect" Externalities are costs or benefits arising from an economic activity that affect somebody other than the people who are engaged in the economic activity and are not reflected fully in prices." (Bishop 2012)Negative Externality (external cost) : Cost of an externalityPositive Externality (external benefit): Benefit of an externality TERM 5 Sole Proprietorship DEFINITION 5 Advantages: Low- start up costs, direct control by owner, tax advantages for small owner, all profits to owner, low start up costsDisadvantages: Unlimited personal liability, More difficult to raise capital TERM 6 Partnership DEFINITION 6 Advantages: Additional sources of venture capital, Broader management, limited outside regulation, limited liability, specialized management, ownership is transferable.Disadvantages: Divide authority,difficulty in raising additional capital, hard to find suitable partners, closely regulated, most expensive to organize. TERM 7 Single- Entity Ownership DEFINITION 7 Rather than having one owner for one club in a league, a group of owners jointly own all clubs in the league.- MLS- League can plan labor costs- Don't compete with each other for players TERM 8 Mergers and Acquisitions DEFINITION 8 Chain of Production- Steps through which consumer goods and services are providedHorizontal Integration- Two companies at the same level and industryVertical Integration- Combination of companies involved in different phases of producing a product- One company is a buyer of other's product TERM 9 Strategic Alliances DEFINITION 9 A form of cooperation between two or more industrial sectors- Helps to cut costs- Maintain quality- Increase synergyRationales for forming strategic alliances:- Partners aim at achieving competitive advantages for the partners.- Both partners put in resources and access to competencies or share complementary assets. TERM 10 Gross Domestic Product (Expenditure Approach) DEFINITION 10 GDP= C+I+G + (X-M)C= Consumption of expendituresI= Private Domestic InvestmentG= Government purchases of goods and servicesX= Gross exportsM= Gross imports TERM 21 Labor Demand DEFINITION 21 Relationship between hire rate and the number of workers a firm wishes to hire.Demand for labor is derived from the demand of consumers for the goods and services labor can produce.Shows the highest wage rate a firm would pay for an additional unit of labor.If hiring a third worker increases revenue by $50/ day, $50/ day is the most the firm would be willing to pay that worker. TERM 22 Labor Productivity DEFINITION 22 Work done by resources providedThe demand for labor depends on the size of the increase in marginal product and the decrease in marginal revenue.An increase in productivity can reduce the demand of labor if output remains the same.Increased productivity reduces cost of production, and costs decrease. Lower price enables the firm to sell more output.More output may mean the firm may hire more workers because they can sell more product. TERM 23 Labor Supply DEFINITION 23 Relationship between the wage rate and the amount of labor available for hire.People use opportunity cost analysis to make decisions about entering a labor market.A person is willing to work in a market when the return on work done exceeds the value of the best alternative use of time.Increase in supply reduces monetary wages. TERM 24 Monopolistic Labor Markets DEFINITION 24 One employer of laborLaborers do notreceive their marginal revenue productNo competition to bid up wagesReservation Wage: The wage high enough to compensate the worker for the opportunity cost of working for the firm. TERM 25 Bilateral Monopoly DEFINITION 25 Monopoly faces a monopolistic buyerBuyer hires workerSeller is a labor union representing workersGoal of union is to maximize gains of its membersNRLA grants following rights to workers:- Right to self- organize, form, join or assist labororganizations- Right to collective bargaining through representative of their choosing- Right to engage in " concerted activities" for employees mutual aid or protection. TERM 26 Coase Theorem DEFINITION 26 In law and economics, the Coase theorem, attributed to Nobel Prize laureate Ronald Coase, describes the economic efficiency of an economic allocation or outcome in the presence of externalities. TERM 27 Free Agency DEFINITION 27 Players can sell their services to different teamsMarket becomes morecompetitive for their servicesSalaries have increased as a result of that increased competition TERM 28 Monopsony in Professional Sports DEFINITION 28 League restrictions to control player labor market.Done through reserve clause and draft systemReserve Clause: Teams own rights to players, cannot sell services to other teams unless traded, rights are sold, or cut by team.Drafts:-Control market for players through draft systems, this prevents teams from having to pay incoming teams MRP.- Draft is conducted to ensure competitive balance- Coarse theorm TERM 29 Factors Affecting Demand for Players in Pro Sports DEFINITION 29 Demand for players is determined by their marginal revenue product (MRP)Team revenue affected by:- Fame of player- Player improves win- loss record of the team TERM 30 Corporation DEFINITION 30 Advantages: Continuousexistence, legal entity, easier to raise capital,unityof account having, centralized authority in board of directors.Disadvantages: Extensive record- keeping necessary, double taxation, difficult to liquidate investment.