Economics of Sport, Business Economics

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Assume there are two teams in the league: Los Angeles and Sacramento. Because it is a much larger metropolitan area, the revenue generated at any given winning percentage is higher for the Los Angeles franchise than for the Sacramento franchise.

1.Draw a graph that shows the marginal revenue product curves of the two franchises. Make sure your axes are properly labeled. Show the equilibrium level of competitive balance and the equilibrium level of player salaries.

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