1. Imagine a league is composed of two teams, a larger (L) and a smaller (S) revenue team. WL and WS are their respective winning proportions. Their marginal revenue functions are (values in millions of dollars) MRL = 90 90*WL MRS = 90 90*WS

a. What is the equilibrium price of winning percent? Show it graphically as well.

b. What will be the values of WL and WS in equilibrium? Show them graphically as well.

c. What will be the equilibrium total talent bill for each? Identify them graphically as well.

2. Repeat problem number 1 with the following marginal revenue functions: MRL = 95 90*WL MRS = 85 90*WS

3. Repeat problem number 1 with the following marginal revenue functions: MRL = 100 90*WL MRS = 80 90*WS

4. Return to problem 2 marginal revenue curves. Suppose the league imposes a luxury tax of $45000 on each point (.001) over .500.

e. What is the new price of winning percent?

f. What are the new WL and WS in equilibrium?

g. What are the new equilibrium talent bills for each team?