Deck 43: If We Build It, Will They Come and Other Sports Questions

Question 1

The argument that increasing the number of casinos in a state will increase overall tax revenue in the state is

A) substantially correct, because they pay substantial taxes.
B) overstated but still partially correct, because there is tax substitution but gambling profits are taxed more heavily than other profits.
C) understated because they pay more taxes than is generally known.
D) wrong because casino profits are not taxed.

Answer 1

The objective is to understand the argument of tax revenue of casinos.
Note that in case of casinos in a given city, the people who go there are mostly from the same city. This though seems to increase the economic activity of that city but is not true because an increase in the activity due to casinos would have been because of decline in other entertainment activities. Hence the casinos do no seen to have a major economic impact on a city of a community.
However, since the profits from the casinos are taxed at a higher rate, thus there can be an increase in the collection of the taxes. This also might not be too much as the community already had a casino so there might not be a larger substitution of other activities for casinos.
Thus, we can say that increasing casinos in a state will increase tax revenue is overstate but is also partially true and hence is the correct answer.

Question 2

The concern that gambling affects not only the gambler and casino but others is called a _____ and suggests that there would be too _____ production in an unregulated or untaxed market.

A) positive externality; much
B) negative externality; much
C) positive externality; little
D) negative externality; little

Answer 2

The objective is to understand the effect of gambler and casino in social terms.
Note that the casinos tend to develop a feeling of "must do" in the minds of the betters and the gamblers thus tend to borrow or even mortgage their properties to gamble even more. This creates lot of tensions among the people associated with the gamblers and hence it tends to create a negative externality.
A negative externality is a situation when the consumption of a good or service by a person creates a negative impact on the lives of the other people not consuming that good/service.
Also note that without taking into consideration the costs incurred by others, it tends to produce more.
Thus, we can say that casinos not only impact gamblers but also others by creating negative externality. This also implies that there is over production in the unregulated market and hence is the correct answer.

Question 3

The argument that casinos have little economic impact on a community is based on the notion of

A) supply.
B) demand.
C) opportunity cost.
D) local substitution.

Answer 3

The objective is to understand the argument behind the impact of casinos.
Note that in case of casinos in a given city, the people who go there are mostly from the same city. This though seems to increase the economic activity of that city but is not true because an increase in the activity due to casinos would have been because of decline in other entertainment activities. Hence the casinos do no seen to have a major economic impact on a city of a community.
Thus, we can say that the argument behind the little impact the casinos have on community is as per the notion of local substitution and hence is the correct answer.

Question 4

If you were in a political argument with someone taking the side of the casino industry and she pointed out that casinos pay significant taxes, how would you (being on the other side) respond?

Question 5

Economists generally believe that a new casino in a city that already has them would likely have _____ economic impact.

A) an enormously negative
B) a modestly negative
C) an enormously positive
D) a modestly positive

Question 6

Suppose you were in a political argument with someone who wanted to locate a casino in your city (supposing that it had none), because there was a large city across the river in another state (also without one), and he pointed out that you could lure all those people in that large city to spend their money in your city. Supposing that you were against it, how would you counter that particular point?

Question 7

Which one of the following communities would likely see the greatest economic impact from a new casino?

A) Plainfield, IN (just outside Indianapolis).
B) Gary, IN (outside Chicago and already has one).
C) Terre Haute, IN (Indianapolis is 70 miles away; no other population center is closer than 180 miles).
D) Las Vegas, NV.

Question 8

What externalities exist when there is a casino, and how might those externalities be dealt with in a way that would allow a casino while also mitigating the externalities?

Question 9

The percentage that casinos make on the average bet is called the

A) vig.
B) rip.
C) take.
D) rob.