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.
2. Re-draw the graph from question #1. Sacramento is currently building a new arena that will add 34 luxury suites that will be priced at $200,000 per box and three premium clubs. This should increase the revenue associated with any given winning percentage. Show the impact of the new arena on competitive balance and salary levels.
3. Re-draw the graph from question #2. Suppose Los Angeles builds its own arena that has three times as many luxury boxes as the arena in Sacramento. As a result, the increase in revenue associated with any winning percentage is larger than what existed after Sacramento built its new arena. Show the impact of the of the new LA arena on competitive balance and player salaries.