Sports Economics 3700 First Midterm Exam Cheap calculators only Total points 60 Use an answer sheet Use a pencil to mark the best answer Questions 1 7 Consider the 30 National Basketball Association teams in 2007 The graph below plots winning percentage against team revenue The regression estimate is shown as a line with t statistics in parentheses 250 team revenue millions of Knicks 200 Mavericks 150 Jazz 100 Rev 94 63 Win R 2 0 11 5 4 1 90 50 0 0 000 winning percentage 0 200 0 400 0 600 0 800 1 000 1 The underlying theory associated with the regression line is a team revenue causes increased team success b team success causes increased team revenue c teams with no wins generates a revenue of 94 million d the slope of the regression line is 63 e none of the above 2 The regression reported above estimates that a NBA team that loses all its games generates annual revenue of a zero b 63 million c 94 million d 157 million e none of the above 3 The regression estimates that a NBA team that wins all its games generates annual revenue of a zero b 63 million c 94 million d 157 million e none of the above 2 4 The regression implies that the intercept coefficient a is statistically significant b is not statistically significant c estimates the financial incentive for athletic success d equals 5 4 e none of the above 5 The regression reported implies that the slope coefficient a is statistically significant b is not statistically significant c estimates the financial incentive for athletic success d equals 1 9 e none of the above 6 The goodness of fit is the regression reported above a is measured by its t statistic b is measured by its R2 statistic c is excellent d is statistically significant e is none of the above 7 The Dallas Mavericks point is above the regression line because a the owner s only goal is winning NBA championships b the owner s only goal is maximizing profit c the Mavericks are likely to relocate to Seattle d the Mavericks are an outlier among NBA teams e none of the above 3 Questions 8 16 Continuing with 2007 NBA teams the table below shows Excel output for a multiple regression Again NBA team revenue is the dependent variable Metropolitan population comes from the 2000 Census and is measured in millions The monopoly 1 is a dummy variable for teams with a monopoly in their hometown all except New York and Los Angeles SUMMARY OUTPUT Regression Statistics Multiple R R Square Adjusted R Square Standard Error Observations intercept winning population monopoly 1 8 0 650 0 422 0 355 25 13 30 Coefficients 1 53 73 93 6 73 63 97 Standard Error 46 34 28 20 2 44 38 23 t Stat 0 03 2 62 2 76 1 67 P value 0 97 0 01 0 01 0 11 The estimated multiple regression equation is a Rev 1 5 73 9 Win 6 7 population 64 0 monopoly 1 b Rev 46 3 28 2 Win 2 4 population 38 2 monopoly 1 9 c Rev 0 03 2 62 Win 2 76 population 1 67 monopoly 1 d Rev 0 97 0 01 Win 0 01 population 0 11 monopoly 1 e none of the above The multiple regression corrects for the Knicks effect in the simple regression above because a the intercept coefficient is no longer statistically significant b the Knicks have a monopoly in their home market c The R2 statistic is greater than 0 50 d it includes an independent variable that measures market size e none of the above is true 10 The underlying theory associated with the monopoly 1 variable is a that monopoly power causes increased team revenues b that when two teams share the same market both have worse win loss records c that monopoly power increased team revenues by 64 million d all of the above e none of the above 11 Based on this multiple regression we can conclude that a the overall goodness of fit of this regression is very poor b more than half the NBA teams are on the verge bankruptcy c the winning variable has no statistically significant effect on team revenue d the population variable has a statistically significant effect on team revenue e none of the above is true 4 12 The multiple regression estimates that if a NBA team increases it winning percentage by 0 100 then its annual revenue a increases by 7 4 million b increases by 2 8 million c increases by 0 3 million d increases by 74 million e is none of the above 13 The multiple regression estimates that if a team moves to a city with 1 million more people and no existing NBA team then its annual revenue a decreases 1 5 million b increases 74 million c increases 6 7 million d increases 64 million e is none of the above 14 The multiple regression estimates that if a second NBA team moves to the same city then the revenue of the resident NBA team a does not change b increases by 64 million c decreases by 64 million d decreases by 6 4 million e none of the above 15 The multiple regression a reports that the intercept coefficient is not statistically significant b reports that the monopoly 1 coefficient is not statistically significant c estimates the financial incentive for athletic success d is based on the theory that there are multiple causes of team revenue e all of the above are true 16 A prediction of 1 5 million revenue for a NBA team that does not win a single game all season and shares its hometown with another NBA team in a city with zero population is a statistically significant b consistent with the multiple regression c a real possibility for the Minnesota Timberwolves d confirmed by history e none of the above 5 Questions 17 30 The demand for the NCAA Women s Gymnastic Championships April 28 2007 is shown below hypothetically The NCAA s marginal cost of supplying seats is zero up to the 20 000 capacity of the Huntsman Center The NCAA s fixed cost is zero also hypothetically Gymnastic Championships Ticket Market 17 Suppose that the NCAA sets the price at 60 ticket a the ticket revenue is 200K b profits are not maximized c 20K tickets are sold d the deadweight loss is 200K e all of the above 18 Suppose Governor Huntsman Utah governor in 2007 decides to control the price at 10 ticket then a scalping will be common b profits are not maximized c 20K tickets are sold d the deadweight loss is zero e all of the above 19 Suppose Governor Huntsman decides to control the price according to the principle of perfect competition then a the ticket revenue is 200K b profits are maximized c 20K tickets are sold d the deadweight loss is 200K e all of the above 20 If the NCAA were able to …