Microeconomics Homework

Chapter 10 & New Chapter 8 Homework (SHOW YOUR WORK)

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.

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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?