1. Estimate the Cobb-Douglas production function Q = L1K2 where Q = output; L = labor input;...
Question:
1. Estimate the Cobb-Douglas production function Q = αLβ1Kβ2 where Q = output; L = labor input; K = capital input; and α, β1, and β2 are the parameters to be estimated.
2. Test whether the coefficients of capital and labor are statistically significant.
3. Determine the percentage of the variation in output that is “explained†by the regression equation.
4. Determine the labor and capital estimated parameters, and give an economic interpretation of each value.
5. Determine whether this production function exhibits increasing, decreasing, or constant returns to scale. (Ignore the issue of statistical significance.)
Economists at the Wilson Company are interested in developing a production function for fertilizer plants. They collected data on 15 different plants that producefertilizer.
Step by Step Answer:
Managerial economics applications strategy and tactics
ISBN: 978-1439079232
12th Edition
Authors: James r. mcguigan, R. Charles Moyer, frederick h. deb harris