An economist fits the following production function to data from Australia and New Zealand,Y = AK" L1-«She estimate that for Australia, a == 0.7.She estimates that for New Zealand, a == 0.2Based on this information, which of the following statements is most likely to be correct.There is not enough information to comment on the relative capital intensitiesProduction wilI be relatively more capital intensive in New Zealand than in AustraliaProduction will be relatively more capital intensive in Australia than in New ZealandProduction will be equally as capital intensive in each country since they both experience constant returns toscale

Production function is the equation that expresses how quantities and factors of production are…

Answered: An economist fits the following…

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter9: Production Functions

Section: Chapter Questions

Problem 9.6P

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Using the annual data for the period of 2000 and 2010, Prof Omanya applied a Cobb -Douglas production function to estimate the production for the Kenya's manufacturing sector using firms listed on Nairobi Securities Exchange. His results were given as: Q= K0.45 L0.55 Where Q = units of output; L = units of Labor; and K = units of capital What are the marginal products of Labor and Capital? Calculate the factor intensity and explain the technique of production that is being used by Prof Omanya How would you characterize the Kenya's manufacturing sector in terms of returns to scale? What are the main three causes of such returns to scale?

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