Question

Production and Cost data; US Furniture Industry: Cross-section of 33 small firms							15
Output	LAB-SKIL	LAB-admn	Raw	Energy
790	3000	2100	400	2500
650	2800	1875	375	2100
120	540	198	115	1400
70	125	80	110	1020
400	2650	1200	320	1600
1020	4500	2030	600	2650
230	980	1000	540	2000
505	1842	1900	506	1765
667	2763	2565	496	1942
663	2925	1320	390	1723
228	980	656	131	735
110	600	430	105	800
2244	9900	4466	1320	5830
415	1789	1198	240	1341
209	1140	817	200	1520
92	367	280	210	1090
41	165	126	95	491
404	1474	1520	405	1412
270	1215	446	259	3150
267	1064	812	609	3161
252	1049	797	594	3146
1346	5940	2680	792	3498
486	2187	802	466	3670
465	2166	781	445	4400
93	180	79	220	1870
33	175	35	155	900
869	3300	2310	440	2750
808	3069	2148	409	2558
50	263	53	233	1350
403	1679	1275	950	5034
161	642	490	368	1908
489	1783	1839	490	1709
541	1890	2001	489	1780
642	2320	2540	530	1980
755	2450	2600	540	2010
790	2570	2720	534	2215
Note: 1. The output is in terms of board-feet of finished product
2. Labor is in terms of total monthly hours
3. Raw matrial is in terms of board-feet of Wood, plastics etc
4. Energy is in terms of kilowatt hours of electricity used
All figures are monthly.
Questions: 1. Estimate the output Elasticities of the Inputs; Do you believe these estimates?
2. What is the returns-to-scale in this industry?
3. What might be the shape of the Long-Run Average cost curve when output is expected to grow 20% per year for next three years and then
	stay at a constant level of growth at 5% for the subsequent 3 years
Hint:                You may want to use the average valules of the independent variables as a Starting point.
4. Suppose this industry (all the firms included) is planning to move overseas to Panama
forming a Joint Venture with a foreign company, what would the investors be likely doing in terms of
better profitability and WHY?
	Month: Nov' 2013 Expense report Receipt Expense title 8050 1,700 Home 4,500 Mortgages 300 Sallie 150 Med 177 ins-chhutk 99 Y 45 life ins 300 phone 75 com 200 gas etc 504 7,546

Answer 1