Question 7.c Y V. N. Murti and V. K. Sastri7 investigated the production character-istics of various Indian industries, including cotton and sugar. Theyspecified Cobb-Douglas production functions for output (Q) as adouble-log function of labor (L) and capital (K):InQ; = Bo + B,lnL; + B,lnK; + E;%3Dand obtained the following estimates (standard errors in parentheses):IndustryBoB1R?Cotton0.970.920.12.98(0.03)(0.04)Sugar2.700.590.33.80(0.14)(0.17)a. What are the elasticities of output with respect to labor and capitalfor each industry?b. What economic significance does the sum (B, + B2) have?C. Murti and Sastri expected positive slope coefficients. Test their hy-potheses at the 5-percent level of significance. (Hint: This is muchharder than it looks!)

The test of hypothesis is done to check whether the estimated coefficients are statistically…

Answered: C. Murti and Sastri expected positive…

C. Murti and Sastri expected positive slope coefficients. Test their hy- potheses at the 5-percent level of significance. (Hint: This is much harder than it looks!)

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter8: Cost Analysis

Section: Chapter Questions

Problem 9E

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