Undertake a comparative statics analysis using the Cobb Douglas Costs Excel App file by filling in the following table. Increase each parameter by 50 percent holding the other parameters at their initial value (listed in Problem 15 above and in the table below) and describe what happens to eat h of the cost curves in both panels of die graphs on the Cobb Douglas Costs Excel App. Answer each question In describing whether the parameter change affects the shape of the function or its placement (Placement means location on the graph.) In particular, answer the following two questions for each curve:
Placement descriptions are perhaps most easily seen by focusing on a single LR/SR tangency and seeing how it changes as the parameter changes. For example, one might start from the LR/SR tangency for the second smallest plant size in the figure (the one with K = 1). The tangency in each panel occurs at (1, 2) given the initial parameter values. What happens to this tangency in each panel as each parameter changes?

A copy of this table is available on a separate worksheet on this file. You can fill it in electronically; then use Copy in Excel; then open Word and use Paste Special, Enhanced Metafile to transfer this to a Word document.
Provide short answers to the following two questions.
a. Which of the live parameters altered returns to scale, and in which direction?
b. Of the factors that did not alter returns to scale, what did they alter?

Transcribed Image Text:

Parameter Total Cost Curves Per-unit Cost Curves Set ValueQuestion: LTCSTC LAC LMC SATC SMO 0.5 0.3 te