Chapter 10: Assignment
Four things to do:
1. Find the definition of (1) an SIC code, and (2) an NAICS code (should be easy to find on the internet).
2. Is there any relationship between the two?
3. Select any large or national firm in the U.S., and find the firm's SIC and NAICS codes.
4. Email you answers to me by EOD on Sunday, June 7th.
Two point questions:
What effect would the following events be likely to have on the price of Google's stock?
1. A competitor launches a search engine that is better than Google's.
2. The price of wireless internet connections in developing countries unexpectedly drops, so more and more people world-wide use the internet.
3. Google announces a profit of $10 billion, but investors anticipated that Google would earn a profit of $11 billion.
Alternative ways of laundering 100 shirts are shown on the table below:
|
Method
|
Labor (hours)
|
Capital (machines)
|
|
A
|
1
|
10
|
|
B
|
5
|
8
|
|
C
|
20
|
4
|
|
D
|
50
|
1
|
4. Which methods are technologically efficient?
Which method is economically efficient if the hourly wage rate and implicit rental rate of capital are:
5. Wage rate $2, rental rate $90?
6. Wage rate $10, rental rate $75?
7. Wage rate $25, rental rate $20?
Market shares of chocolate makers are in the table.
|
Firm
|
Market share
(percent)
|
|
Mayfair, Inc
|
40
|
|
Bond, Inc
|
10
|
|
Magic, Inc
|
15
|
|
All Natural, Inc
|
5
|
|
Truffles, Inc
|
15
|
|
Gold, Inc
|
15
|
8. Calculate the four firm concentration ratio.
9. Calculate the Herfindahl-Hirschman Index.
10. If the interest rate is 5 percent, what is the present value of a bond that matures in two years, pays $65 one year from now and $1,065 two years from now?
Suppose that eLake, an online auction site, is paying a dividend of $3 per share. You expect this dividend to grow 3 percent per year, and the interest rate is 10 percent.
11. What is the most you would be willing to pay for a share of stock in eLake?
12. If the interest rate is 8 percent, what is the most you would be willing to pay?
Chapter 11 Homework
Two point questions
A firm has fixed costs of $50 and variable costs as indicated in the table below. Use this information to answer questions 1, 2, and 3.
1. Complete the table using the Excel spreadsheet attached with the homework.
2. Using the Excel spreadsheet provided, show how the Table is altered if total fixed cost had been $90 rather than $50.
3. Using the Excel spreadsheet provided, show how the Table is altered if total fixed cost had been $90 rather than $50, and total variable cost had been forty percent lower at each level of output.
4. You have just been promoted to Chief Financial Officer for a firm that sells whatchacallits. Your firm has the following average-total-cost schedule:
|
Quantity
|
Average Total Cost
|
|
1,000 whatchacallits
|
$200
|
|
1,001 whatchacallits
|
$201
|
Your current level of production is 1000 whatchacallits, all of which have been sold. Someone calls, desperate to buy one of your whatchacallits. The caller offers you $800 for it. Should you accept the offer and make the 1,001st whatchacallit? Why or why not (SHOW YOUR WORK)?
Chapter 11 Assignment
Take a look at this Seinfeld video (you might have to go outside of Blackboard to get the video to play):
http://yadayadayadaecon.com/clip/76/
Answer the following questions:
1. How does this video capture some of the things discussed in this class concerning costs?
2. What costschange that make their scheme seem profitable?
3. What costs do Newman and Kramer seem to be ignoring?
After you answer the questions, then you might want to take a look at some of the comments provided by others as this video has been used in many micro classes. Submit your response by email to me by EOD on Sunday, June 7th.
Attachment:- Chapter_11_Problems_1_2_3.xls