Brady corporation has eleven plants located around world

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Cobb-Douglas Production Function)

The Brady Corporation has eleven plants located around the world. In a recent year, the data for each plant gave the number of labor hours (in thousands), capital (total net plant assets, in $millions), and total quantity produced:

Labor

Capital

Actual Quantity

250

30

245

270

34

240

300

44

300

320

50

320

350

70

390

400

76

440

440

84

520

440

86

520

450

104

580

460

110

600

460

116

600

The plants all operate at a similar level of technology so a production function can be derived from the data.

a. Use a Cobb-Douglas production function t calculate a regression, and discuss the important characteristics of your results, such as the form of the equation, R2, and the statistical significance of the coefficients.

b. Does the result indicate constant, decreasing, or increasing returns to scale?

c. What are the elasticities of production of labor and of capital? What is the meaning of the elasticities?

Reference no: EM13964966

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