A firms production is characterized by this Cobb-Douglas production function: Q = 12K 0.4 L 0.6 .

Question:

A firm’s production is characterized by this Cobb-Douglas production function:

Q = 12K^0.4L^0.6.

a. If capital K increases by 5 percent, what is the approximate percentage change in output Q?

b. If capital K increases by 3 percent and labor L increases by 4 percent, what is the approximate percentage change in the capital/labor ratio K/L?

c. If price P increases by 5 percent and output Q falls by 4 percent, what is the approximate percentage change in revenue PQ?

d. If capital K and labor L both increase by 5 percent, what is the approximate percentage increase in output Q?

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Essential Statistics Regression And Econometrics

ISBN: 9780123822215

1st Edition

Authors: Gary Smith

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Question Posted: Mar 16, 2024 12:00 PM

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A firms production is characterized by this Cobb-Douglas production function: Q = 12K 0.4 L 0.6 .

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Essential Statistics Regression And Econometrics

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