1. What are some methods by which team owners are able to restrict player salaries? Using our two team marginal revenue model show how a policy restricting salary (without affecting marginal revenue) affects the portion of revenue going to players. Players agree to these restrictions under the belief that such restrictions will increase total demand and in the long run increase payrolls. In a second graph show how increases in demand affect player salaries if the salary cap is a percentage of total revenue.
2. From an economic point of view, should professional tennis tournaments pay the mens and womens bracket an equal amount of prize money? Why or why not? How might one determine the economically fair amount to pay each bracket? Why might the fair value be difficult to determine?