In: Economics
1. The White Noise Corporation has estimated the following Cobb-Douglas production function using monthly observations for the past two years:
ln Q = 2.773 + 0.20 ln K + 0.70 ln L + 0.70 ln N
where Q is the number of units of output, K is the number of units of capital, L is the number of units of labor, and N is the number of units of raw materials. With respect to the above results, answer the following sections when K = 50, L = 250, and N =870.
a. Q
b. Rewrite the estimated function in the form of a power function.
c. Find the marginal products of capital, labor, and raw materials
d. Find the value of the output elasticities of K, L, and N
e. Determine whether the returns to scale are increasing, decreasing, or constant
f. Suppose the price of capital is $1000 per unit, the price of labor is $700, and the price of raw materials is $200 per unit. This is an optimal combination of resources
g. What price would the company have to charge for the product to maximize profits