French Grape Harvest - Papa John’s - GEM Managerial Economics Homework Help

Homework Task:

GEM Managerial Economics Homework Help

Question One
Part (i)  An extremely harsh winter has devastated much of the French grape harvest. At the same time, there has been a major economic recession resulting in a significant decline in incomes in France. With the use of graphs, and assuming wine is a normal good, describe the impact on the wine market in France of these simultaneous events.

Part (ii)  With the use of diagrams, please explain how elasticities help us understand why the price of hotel booking may vary depending on when you make your booking and why Microsoft Office is available at different prices for students compared to other groups of people.

Question Two 
Part (i)  Papa John’s is a company that makes pizza. Here is the relationship between the number of workers at the pizzeria and Papa John’s output in a given day:

a. Fill in the column of marginal product. What pattern do you see and how might you explain it?

b. A skilled pizza maker costs €120 per day, and the firm has fixed costs of €500 per day. Use this information to fill in the column for total cost.

c. Fill in the column for average total cost. What pattern do you see?

d. Fill in the column for marginal cost. What pattern do you see.

e. Compare the column for marginal product and the column for marginal cost and explain the relationship.

f. Compare the column for average total cost and the column for marginal cost and explain the relationship.

g. Papa John’s sells pizzas for €6 each. Use this information to fill in the columns for total revenue and marginal revenue. Also, using the completed table, indicate the firm’s profit maximising output.

Question Three
Part (i)  Assume that two airline companies decide to engage in collusive behaviour. Suppose that each company can charge either a high price for tickets or a low price. If one company charges €100, it earns low profits if the other company also charges €100, and high profits if the other company charges €200. On the other hand, if the company charges €200, it earns very low profits if the other company charges €100, and medium profits if the other company charges €200 also.

a. Draw the payoff matrix for the game.

b. What is the Nash equilibrium of the game? Explain.

c. Is there an outcome that would be better than the Nash equilibrium for both airlines? How could it be achieved? Who would lose if it were achieved?

Part (ii)  Farmer Wild and Farmer Scott graze their cattle on the same field. If there are 20 cows grazing in the field, each cow produces €4000 of milk over its lifetime. If there are more cows in the field, then each cow can eat less grass, and its milk production falls. With 30 cows on the field, each produces €3000 of milk; with 40 cows, each produces €2000 of milk. Cows cost €1000 apiece.

a. Assume that Farmer Wild and Farmer Scott can each purchase either 10 or 20 cows, but that neither knows how many the other is buying when they make their purchase. Calculate the payoffs of each outcome and draw the payoff matrix for the game.

b. What is the likely outcome of this game? What would be the best outcome? Explain.

Part (iii) 
Describe two activities in your life in which game theory could be useful. What is the common link among these activities?

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