Question: A production function for auto factories estimates output (Q) using as predictor variables labor (L), capital (K), and hours of training for all employees (T).

A production function for auto factories estimates output (Q) using as predictor variables labor (L), capital (K), and hours of training for all employees (T).

a. Using your preferred software, access the file OUTPUT and estimate the model.

b. Discuss the significance of the RHS variables.

c. Comment on the difference between the R2 and the adjusted R2 values.

d. Create an interaction term with capital and labor. Run the regression including the newly created interaction term. Discuss its significance. Would you advise retaining it in the model?
Explain.

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