ECON2209 Study Guide - Spring 2018, Comprehensive Midterm Notes - Marginal Cost, Profit Economics, Market Power
12 Oct 2018
School
Department
Course
Professor
ECON2209
MIDTERM EXAM
STUDY GUIDE
Fall 2018
January 16th
1. Introduction to Sports Economics
○ The Importance of Sports
■ Sports can define people and nations
■ Section of sports in the newspaper
■ Industry of sports are relevant
■ Can be used as a tool for diplomacy, bring nations together
● Ex: North and South korea
● Ex: The World Cup, his favorite squad Cote d’Ivoire did not
qualify, as well as Ghana, Cameroon, Italy, US did not qualify
■ Provide entertainment, can increase utility
○ Organization of the Text
■ 3 angles
● Part 1: Review
● Part 2: Industrial Organization (CH 2-5) and Competitive Balance
○ Teams, Franchises etc… what is their cost and revenue
structure, why are they in it, is the industry monopolistic,
competitive etc
○ If the same team always wins there is low competitive
balance… less interesting
● Part 3: Public Finance (CH 6-7)
○ Stuff like NPV, is a stadium worth it
● Part 4: Labor Economics (CH 8-11)
○ Important Concepts:
■ Scarcity: Resources are limited, to satisfy unlimited wants ex:
Teams/leagues are all limited in what they can do to achieve objectives
■ Choice: Economics is the study of making choices because of scarcity
■ Trade Offs: Conflicting actions, in order to do one thing, we must give up
something else. To do more of something requires less of something
else, comes from scarcity and choice.
■ Opportunity Cost: The value of what must be given up to obtain
something. Value of the next highest, or best alternative. Used to look at
absolute and comparative advantages(Chapter 1 goes over this a lot)
■ Absolute Advantage: Producing a good using fewer resources. OR
producing more, given the same amount of resources.
■ Comparative Advantage: Producing a good, with a lower opportunity cost.
Need to compare to another. We have to compute opportunity cost
otherwise it is hard to see. Someone could have an absolute advantage
but NOT a comparative advantage.
■ Production Possibilities ex:
● Writing Poems:
● Martha: 10 per hour
● Paul: 12 per hour
● Writing songs”
find more resources at oneclass.com
find more resources at oneclass.com
● Martha: 5 per hour
● Paul: 8 per hour
■ *See Babe Ruth example, had absolute advantage in pitching and hitting,
but not comparative advantage.
■ PAUL has absolute advantage in writing poems
■ PAUL has absolute advantage in writing songs
■ Next we look at Opportunity Cost:
● Martha:
○ For writing a poem: 10 poems per hour / 5 songs per hour,
this ratio gives us 2 poem per song.
○ The cost of writing a song is 2 poems. The cost of writing a
poem is half a song.
● Paul:
○ 12 poems per hour / 8 songs per hour this ratio gives us
3/2 poems per song
○ Cost of writing a poem is ⅔ of a song
● To martha, she has the comparative advantage for making poems
as she has the lower opportunity cost
● Martha vs. Paul (OC)
○ Writing a poem:
■ Martha: .5
■ Paul: .67
○ Writing a Song
■ Martha: 2 (inverse of .5)
■ Paul: .34 (inverse )
Martha has comparative advantage in writing a poem, BUT Paul has the comparative
advantage in writing songs
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
Can be used as a tool for diplomacy, bring nations together. Ex: the world cup, his favorite squad cote d"ivoire did not qualify, as well as ghana, cameroon, italy, us did not qualify. Part 2: industrial organization (ch 2-5) and competitive balance. Teams, franchises etc what is their cost and revenue structure, why are they in it, is the industry monopolistic, competitive etc. If the same team always wins there is low competitive balance less interesting. Stuff like npv, is a stadium worth it. Scarcity: resources are limited, to satisfy unlimited wants ex: Teams/leagues are all limited in what they can do to achieve objectives. Choice: economics is the study of making choices because of scarcity. Trade offs: conflicting actions, in order to do one thing, we must give up something else. To do more of something requires less of something else, comes from scarcity and choice. Opportunity cost: the value of what must be given up to obtain something.
