A “Cobb-Douglas” production function relates production (Q) to factors of produc

Question

A “Cobb-Douglas” production function relates production (Q) to factors of production, capital (K), labor (L), and raw materials (M), and an error term u using the equation Q = K1 L 2M3 e u , where , 1, 2, and 3 are production parameters. Suppose that you have data on production and the factors of production from a random sample of firms with the same Cobb-Douglas production function.

(a) How would you use regression analysis to estimate the production parameters?

(b) Suppose that you would like to test that there are constant returns to scale in this industry. How would you do that?

(c) Is there a way to impose the constant returns to scale in estimating the production parameters?

Explanation / Answer

Here the question is not clearly stated, here a relation is given between production(Q) and its factors capital(K), labour(L) and raw materials(M), but the relation is not understandable, is the every variable that is mentioned in the equaation are all multiplicatively related? it should be clearly stated.

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.