sports_econ_handout_02

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Los Angeles Pierce College *

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101

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Economics

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Feb 20, 2024

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IN-CLASS HANDOUT – 02.14.24 Sports Economics, ECON 315 Please submit a file upload of the handout to Canvas shortly after class by the due date listed in Canvas. You must be present in Allen 1002 during class hours to receive credit for the in-class handout. 1) How have the costs of hosting the Olympics changed over the last fifty years? 2) Did the number of cities/countries bidding for the 2022, 2024, and 2028 Olympic games increase or decrease relative to previous two decades? 3) List three potential benefits (excluding TV revenues and ticket sales) that a city/country could gain from hosting the Olympics? 4) What is the framework that is used to analyze long-term investments? 5) List two potential economic reforms to the Olympic hosting process that could increase the NPV of hosting the Olympics. 6) Consider the following problem. If Boston hosts the Olympics, it will receive $100,000 in exactly one year from now, receive $100,000 exactly two years from now, and receive $100,000 exactly three years from now. At the end of three years, Boston will be able to resell the new Olympic stadiums for $250,000. Suppose Boston must invest $475,000 to build infrastructure to host the Olympics and that the interest rate is 7%. Use the formula for NPV listed below to help you solve for the NPV of the Boston Olympics (in the interest of time, you can “setup” the problem without calculating the values. NPV = t = 0 T B t C t ( 1 + r ) t
The solution to a similar problem from Goolsbee Microeconomics Chapter 14.2 is posted here: 7) While governments or firms will want to invest in projects with positive NPV, they must often make choices among competing projects with positive NPV. That is, they must consider the opportunity costs of various projects. Name a process that firms/governments can use to decide between competing projects.
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