the following Cobb Q=aLBFB₂K B₂ where L = labor input in worker hours, F = fuel input in gallons, K = capital input in number of buses, and Q = output measured in millions of bus miles. ortation system in a particular city: Suppose that the parameters (a, B₁, B2, and B3) of this model were estimated using annual data for the past 25 years. The following results were obtained: a = 0.0012; B₁=0.45; B₂=0.20; and 33 = 0.30. Determine the labor, fuel, and capital input production elasticities. Input Production Elasticities Labor Fuel Capital Suppose that labor input (worker hours) is increased by 1% next year (with the other inputs held constant). What is the approximate percentage change in output? Suppose that capital input (number of buses) is decreased by 3% next year (when certain older buses are taken out of service). Assuming that the other inputs are held constant, what is the approximate percentage change in output? returns to scale appear to characterize this bus transportation system. (Hint: Ignore the issue of statistical significance.)

the following Cobb Q=aLBFB₂K B₂ where L = labor input in worker hours, F = fuel input in gallons, K = capital input in number of buses, and Q = output measured in millions of bus miles. ortation system in a particular city: Suppose that the parameters (a, B₁, B2, and B3) of this model were estimated using annual data for the past 25 years. The following results were obtained: a = 0.0012; B₁=0.45; B₂=0.20; and 33 = 0.30. Determine the labor, fuel, and capital input production elasticities. Input Production Elasticities Labor Fuel Capital Suppose that labor input (worker hours) is increased by 1% next year (with the other inputs held constant). What is the approximate percentage change in output? Suppose that capital input (number of buses) is decreased by 3% next year (when certain older buses are taken out of service). Assuming that the other inputs are held constant, what is the approximate percentage change in output? returns to scale appear to characterize this bus transportation system. (Hint: Ignore the issue of statistical significance.)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Cobb-Douglas production function Q = Lβ1Fβ2Bβ3 Where L = labour input in worker hours F = fuel input in gallons B = capital input in number of buses Q = output measured in millions of bus miles Suppose that the parameters (α, β1, β2 and β3) of this model were estimate using annual data for the past 25 years. The following results were obtained: β1 = 0.45, β2 = 0.20 and β3 = 0.30 Suppose that capital input (number of buses) is decreased by 3 percent next year (which, certain older buses are taken out of service). Assuming that the other inputs are held constant, determine the approximate percentage change in output. What type of returns to scale appears to characterize the transportation system (ignore the issue of statistical significance)? Discuss some of the methodological and measurement problems one might encounter in using time-series data to estimate the parameters of this model.
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