Sport Economics and Finance
Problem Set 2
This problem set is due by February 19, 2013.
Completed, word processed papers need to be handed in by the end of class.
This is an individual assignment.
Chapter 5
1. What is economics?
2. Define demand, scarcity and price.
3. Contrast microeconomics and macroeconomics.
4. Explain the difference between economic profit and accounting profit.
5. What are opportunity costs?
6. Define the term entrepreneurs.
7. What does an antitrust exemption allow for?
8. Contrast non-for profit and for-profit businesses.
9. Briefly explain the advantages and disadvantages of the following: sole proprietorships,
partnerships, S corp, LLC/LLP, and C corp.
10. Explain the Dow Jones Industrial Average.
11. Briefly contrast capitalistic and socialistic economic systems.
12. Are laissez-faire policies and Great Society initiatives diametrically opposed? Explain your
answer.
13. What is the Federal Reserve’s role in Monetary Policy?
14. Explain the stock program of the Green Bay Packers.
15. What happens when the Federal Reserve changes the discount and federal funds rate?
16. What are the effects of increasing and decreasing the money supply?
17. What is fiscal policy?
18. How does depreciation work?
19. Describe the various types of taxes professional athletes are subject to.
20. What are the theoretical underpinnings of the Fair Tax?
Chapter 6
1. What is a budget?
2. Explain the role of planning in budgeting.
3. Define forecasting.
4. List four guidelines for forecasting.
5. What are the four steps in the budget formulation process?
6. Contrast the following: budget time horizon, business planning horizon, and strategic
planning horizon.
7. What are the two keys to successful budgeting?
8. What are eight best practices in budgeting?
9. Describe the four approaches to budgeting.
10. Explain the following: revenue budget, expense budget, cash budget, and capital expenditure
budget.
Chapter 7
1. What is the required rate of return?
2. Define the following: production opportunities, time preference for consumption, risk and
inflation.
3. Describe equity financing.
4. Explain the role of the following in financing: shares, retained earnings, government funding
and gifts/donations.
5. Explain the relationship between for-profit businesses and equity ownership.
6. Define capital gain.
7. Define debt financing and contrast the two major sources of debt financing.
8. What is a bond?
9. Explain the coupon rate.
10. What information does a bond’s rating supply?
11. What is a bond’s default risk?
12. What are junk bonds?
13. What are the key aspects of a loan?
14. What is trade credit? Give an example of how it is used in the goods/merchandise sector of
sport finance.
15. Explain bankruptcy.
16. What is liquidation?
17. Briefly explain the advantages and disadvantages of publicly traded equity financing.
Chapter 8
1. What is capital budgeting?
2. Explain capital expenditure.
3. What are the four parts of the capital budgeting process?
4. Explain the relationship between capital expenditures and the Americans with Disabilities
act.
5. Define the following: net present value, and internal rate of return.
6. Explain the advantages a team gains when it finances a large portion of a new stadium using
private funds.
Chapter 9
1. How do teams and ownerships benefit from new stadiums?
2. Briefly describe revenue sharing in the NFL.
3. What revenue streams available to NFL teams do not have to be shared?
4. Define the following: positive externalities, public good, non-rival and non-excludable.
5. Explain the concept of psychic impact.
6. Explain the concept to franchise free agency as it pertains to the public funding of new sports
facilities.
7. Contrast public and private financing.
8. Briefly describe the three historical sports facility construction phases.
9. Explain nominal and real costs.
10. Do you think the lease agreement between the Baltimore Ravens and the City of Baltimore is
fair for the taxpayers of Baltimore? Explain your answer.
11. Explain the benefit principle and contrast vertical and horizontal equity.
12. Define the efficiency principle.
13. Explain price elasticity of demand end describe how it is interpreted.
14. Explain the following public financing sources and techniques: general obligation bonds,
certificates of participation, revenue bonds, tax increment financing and property taxes, sales
tax, tourism/food and beverage tax, sin tax, sale of government assets, state appropriations,
revenues from ticketing and parking, lotteries and gaming revenues, player income taxes,
utility and business license tax, and reallocation of existing budget.
15. What are indirect sources of public financing?
16. Explain the two private financing sources and techniques.
17. What are the major issues associated with public/private partnerships?
18. Explain the concept of naming rights as a revenue stream.