Re: Exercise 3 Question 3 Answers Essay

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5. A). Ln Q= 2.303 + .4ln(200)+.6ln(400)+.2ln(4,000) Ln Q= 2.303 + .4(5.298)+.6(5.991)+.2(8.294) Ln Q= 9.6756 Q= 15,930.90 B). Ln Q= 2.303 + .4ln(200*1.1)+.6ln(400)+.2ln(4,000) = 2.303 + .4ln(220)+.6ln(400)+.2ln(4,000) = 2.303+.4(5.394)+.6(5.991)+.2(8.294) =9.714 =16,547.66 =16,549.97 – 15,930.90 = 619.07 Ln Q= 2.303 + .4ln(200*1.1)+.6ln(400*1.1)+.2ln(4,000) =2.303 + .4ln(220)+.6ln(440)+.2ln(4,000) =2.303+.4(5.394)+.6(6.087)+.2(8.294) =9.772 =17,528.79 =17,523.98 – 16,549.97 =974.01 Ln Q= 2.303 + .4ln(200*1.1)+.6ln(400*1.1)+.2ln(4,000*1.1) =2.303 + .4ln(220)+.6ln(440)+.2ln(4,400) =2.303+.4(5.394)+.6(6.087)+.2(8.389) =9.7906 =17,865.02 =17,861.23 – 17,523.98 =337.25 C). Ln Q= 2.303 + .4ln(200*1.1)+.6ln(400*1.1)+.2ln(4,000*1.1) =2.303 + .4ln(220)+.6ln(440)+.2ln(4,400) =2.303+.4(5.394)+.6(6.087)+.2(8.389) =9.7906 =17,861.23 Economies of scale increases production 1,930.33 units when all variables are increased by 10 percent at one time D). .4/3.4= .11 .6/4.15=.14 .2/3.05= .07 The estimated coefficients of the production function are not statistically significant at the 5% level. The D-W statistic of 2.20 indicates an absence of autocorrelation as a value of 2.0 or similar indicates no autocorrelation. Multicollinearity is present in this regression. This is due to t stats greater then

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