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STATS Group Assignment - Cobb-Douglas Production Function




Question;Assignment2The dataset below contains information on the input of production data and on the output (in naturallogarithms) for 30 hypothetical companies. With the data, the parameters of a Cobb-DouglasProduction Function can be estimated. I converted the data into natural logs trying to make your lifeeasier and also prevent you from following your textbooks use of log of base 10. This method takemore steps to find the answers for the questions below. Make sure you read my special lecture noteand watch the Panopto lecture.lnKlnL lnQ3.6889 3.6889 3.46753.68893.68893.68894.3824.3824.3824.3824.78754.78754.78755.07525.07525.07525.07525.29835.29835.29835.48065.48065.48065.48065.63485.63485.63485.63485.76835.76835.76835.76834.78755.29835.76833.68894.3825.07525.63484.78755.29835.76833.68894.3825.07525.48064.78755.29835.76833.68895.07525.48065.63484.3824.78755.48065.76833.68894.78755.29835.76833.80693.75644.09183.59463.51494.12814.45344.00314.18964.54633.6434.12424.47234.35634.39654.39344.74873.67264.49914.50274.60624.2194.09044.74514.72283.99254.77194.90124.8305A multiplicative Cobb-Douglas Production Function is written as Q = AK?L?. We cannot use the Ordinary Least Squares method (OLS) in Excel to estimate the above multiplicative Cobb-Douglas Production Function since the independent variables are not linear. Hence, by transforming the above Cobb-Douglas production function into natural logs, we make the independent variables into linear. Then we can use the OLS technique.1. After estimating the transformed Cobb-Douglas production function using the data, write the estimated Cobb-Douglas production equation in natural logarithms. Make sure you use the proper variable names used in the data preparation.2. Test whether coefficients of capital and labor are statistically significant.3. What are the labor production elasticity and the capital production elasticity from the regression output.4. Using information from Question 3, how much does output increase if L increases by 2%?5. Determine whether this production function exhibits increasing, decreasing, or constant returns to scale. (Ignore statistical significance of the variables). Then explain your finding.6. What's the MPL at L = 50, K = 100, & Q = 741?


Paper#52638 | Written in 18-Jul-2015

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