Q.2. We have access to the following data on power-producing firms:Var NoVariable NameComments1OrderObservation number (1-245).2CostsCost in millions of dollarsKWHOutput in billions of kilowatt hours4PLPrice of labor5PFPrice of fuel6.PKPrice of capitalSuppose the "true" cost model is:In C*Bo + By In y + Bị In pi + ß2 In p + error where,In C – In p3In C*In piIn pIn pi – In p3In p2 – In p3In stands for natural log,C is the costP1, P2, P3 are the three input prices, andy is the output.you used Ordinary Least Squares to estimate the cost model ln C* = Bo + By In y +B, In pi + error, will your estimates of the coefficients be biased on unbiased? ExplainIfin words.

Answered: Image /qna-images/answer/c4173ed6-7599-4bc6-8771-b3073d22ab82.jpg

Q.2. We have access to the following data on power-producing firms: Var No Variable Name Comments Order Observation number (1-245). Cost in millions of dollars 1 2 Costs 3 KWH Output in billions of kilowatt hours 4 PL Price of labor 5 PF Price of fuel 6 PK Price of capital Suppose the "true" cost model is: In C* Bo + By Iny + B1 In pi + B, In p + error where, In C – In p3 In C* In pi Inpi – In p3 In p In p2 – In p3 In stands for natural log, C is the cost P1, P2, P3 are the three input prices, and y is the output. If you used Ordinary Least Squares to estimate the cost model In C* = Bo + By In y + B, In pi + error, will your estimates of the coefficients be biased on unbiased? Explain in words.

Q.2. We have access to the following data on power-producing firms: Var No Variable Name Comments Order Observation number (1-245). Cost in millions of dollars 1 2 Costs 3 KWH Output in billions of kilowatt hours 4 PL Price of labor 5 PF Price of fuel 6 PK Price of capital Suppose the "true" cost model is: In C* Bo + By Iny + B1 In pi + B, In p + error where, In C – In p3 In C* In pi Inpi – In p3 In p In p2 – In p3 In stands for natural log, C is the cost P1, P2, P3 are the three input prices, and y is the output. If you used Ordinary Least Squares to estimate the cost model In C* = Bo + By In y + B, In pi + error, will your estimates of the coefficients be biased on unbiased? Explain in words.

Linear Algebra: A Modern Introduction

4th Edition

ISBN:9781285463247

Author:David Poole

Publisher:David Poole

Chapter2: Systems Of Linear Equations

Section2.4: Applications

Problem 17EQ

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