Answered: Consider the Cobb- Douglas production…

MATLAB: An Introduction with Applications

6th Edition

ISBN:9781119256830

Author:Amos Gilat

Publisher:Amos Gilat

Chapter1: Starting With Matlab

Section: Chapter Questions

Problem 1P

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Consider the Cobb- Douglas production function, Q = aK^bL^c ; b and c

a) Can be estimated using OLS on the equation Q = a +bK+cL

b) Can be calculated from the covariances of K and L with Q

c) cannot be estimated using OLS

d) can be estimated using OLS on the equation log(Q) =log(a) +b log(K) +b log(L)

Definition Definition Measure of how two random variables change together. Covariance indicates the joint variability or the directional relationship between two variables. When two variables change in the same direction (i.e., if they either increase or decrease together), they have a positive covariance. When the change is in opposite directions (i.e., if one increases and the other decreases), the two variables have a a negative covariance.

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