1. Consider production function of the form Q= f(H, K), where Q is the output measure...

1. Consider production function of the form Q= f(H, K), where Q is the output measure and H and K are hours worked and gross capital stock, respectively. Based on 33 observations we obtain the following results:
?og(?) = 0.129 + 0.448 ?og (?) + 0.559 ?og (?)
(Standard Error) (0.546) (0.704) (0.816)

R²= 0.886
a. Interpret the regression results.

b. What is the output elasticity of hours worked?

c. Verify that the coefficients of log(H) and log(K) are statistically insignificant at the 5% level.

d. What might account for the insignificance of log(K) and log(H) if you are told that the correlation coefficient between log(H) and log(K) is 0.980?

Expert Solution

orchestra answered 2 years ago

Suppose that output Q is produced with the production function Q = f(K;L), where K is...

Suppose that output Q is produced with the production function Q = f(K;L), where K is the number of machines used, and L the number of workers used. Assuming that the price of output p and the wage w and rental rate of capital r are all constant, what would the prot maximizing rules be for the hiring of L and K? (b) What is theMRTSK;L for the following production function: Q = 10K4L2? Is this technology CRS, IRS or...

Suppose that output Q is produced with the production function Q = f(K,L), where K is...

Suppose that output Q is produced with the production function Q = f(K,L), where K is the number of machines used, and L the number of workers used. Assuming that the price of output p and the wage w and rental rate of capital r are all constant, what would the proﬁt maximizing rules be for the hiring of L and K? (b) What is the MRTSK,L for the following production function: Q = 10K4L2? Is this technology CRS, IRS...

Consider a firm with production function given by q = f(E, K) = E^(1/4)K^(1/4), where E...

Consider a firm with production function given by q = f(E, K) = E^(1/4)K^(1/4), where E is number of workers and K is capital. The price of labor is w = 4 and price of capital is r = 8. The price of the output that firm produces is 20. The firm can adjust both its inputs. 1) Derive an expression for MRT S for this firm. 2) The firm wants to produce q0 units of output. What would be...

Consider the following production function: x = f(l,k) = lb kb where x is the output,...

Consider the following production function: x = f(l,k) = lb kb where x is the output, l is the labour input, k is the capital input, and b is a positive constant. Suppose b < 1/2. (a) Set up the cost minimization problem and solve for the conditional labour and conditional capital demand functions. Let w and r be the wage rate and rental cost of capital respectively. (b) Using your answer in (a), derive the cost function and simplify...

Consider the firm with production function given by q = f ( L , K )...

Consider the firm with production function given by q = f ( L , K ) = L ^(1/4) K^(1/4). If w = r = 4, what is the change in the producer surplus when the price increases from $16 to $32? (round your answer to one decimal place if necessary)

A firm produces output according to the production function: Q= F(K, L) = 4K + 8L.

A firm produces output according to the production function: Q= F(K, L) = 4K + 8L. a. How much output is produced when K= 2 and L = 3? b. If the wage rate is $60 per hour and the rental rate on capital is $20 per hour, what is the cost-minimizing input mix for producing 32 units of output? c. If the wage rate decreases to $20 per hour but the rental rate on capital remains at $20 per hour, what is the...

Consider an economy described by the aggregate production function Y=f(K,L)=KEL^(1/2) Where Y is the total output,...

Consider an economy described by the aggregate production function Y=f(K,L)=KEL^(1/2) Where Y is the total output, K is the total capital stock, E is the efficiency of labour, and L is the total labour force. Assume this economy has a population growth of 5%, a technological growth rate of 10%, and a depreciation rate of 20%. Use the Solow model with population growth and labour-augmenting technological progress to answer the following questions: Assume this economy has a population growth of...

Consider an economy described by the aggregate production function Y=f(K,L)=(KEL)^(1/2) Where Y is the total output,...

Consider an economy described by the aggregate production function Y=f(K,L)=(KEL)^(1/2) Where Y is the total output, K is the total capital stock, E is the efficiency of labour, and L is the total labour force. Assume this economy has a population growth of 5%, a technological growth rate of 10%, and a depreciation rate of 20%. Use the Solow model with population growth and labour-augmenting technological progress to answer the following questions: Assume this economy has a population growth of...

3. Consider the production function Q = K2L , where L is labor and K is...

3. Consider the production function Q = K2L , where L is labor and K is capital. a.[4] What is the Marginal Product of Capital for this production function? Is it increasing, decreasing, or constant? Briefly explain or show how you arrived at your answer. b.[4] Does this production function exhibit increasing, constant or decreasing returns to scale? Briefly explain or show how you arrived at your answer. c.[5] If the firm has capital fixed at 15 units in the...

Consider the production function Q = K2L , where L is labor and K is capital....

Consider the production function Q = K2L , where L is labor and K is capital. a.[4] What is the Marginal Product of Capital for this production function? Is it increasing, decreasing, or constant? Briefly explain or show how you arrived at your answer. b.[4] Does this production function exhibit increasing, constant or decreasing returns to scale? Briefly explain or show how you arrived at your answer. c.[5] If the firm has capital fixed at 15 units in the short...

Question