Consider the Cobb-Douglas production function that expresses Output (Q) as a function of capital (K) and labor (L): 

a. What are the dependent and independent variables in this equation ? How many parameters are there in this equation ? 

b. How will you estimate the parameters of the Cobb-Douglas function ? What information do you need for estimation ? 

c. The table below contains information on Output (Q), Labor employed (L) and capital hired (K) for various years in the U.S Manufacturing Sector. Please use multiple regression model to estimate the production function in the log-linear form. 

d. Interpret R-squared. 

e. Economic theory tells us that marginal products of capital and labor are both positive, and both these inputs individually exhibit diminishing returns. How do you find out if there characteristics exist ? 

f. Does the industry exhibit increasing returns to scale ? 

Answer rating: 100% (QA)

a In the CobbDouglas production function the dependent variable is Output Q and the independent variables are Capital K and Labor L There are three pa... View the full answer