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Supposing you are a researcher studying the role of factor combination on output of firms in the pharmaceutical industries. You pick out labor and capital as the proxies for the input factors. To do you econometric analysis, you pick out the Cobb-Douglas Production function below, to model this relationship Y = go+KB₁

Supposing you are a researcher studying the role of factor combination on output of firms in the pharmaceutical industries. You pick out labor and capital as the proxies for the input factors. To do you econometric analysis, you pick out the Cobb-Douglas Production function below, to model this relationship Y = go+KB₁

College Algebra
College Algebra
10th Edition
ISBN:9781337282291
Author:Ron Larson
Publisher:Ron Larson
Chapter6: Systems Of Equations And Inequalities
Section: Chapter Questions
Problem 19RE
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QUESTION ONE Supposing you are a researcher studying the role of factor combination on output of firms in the pharmaceutical industries. You pick out labor and capital as the proxies for the input factors. To do you econometric analysis, you pick out the Cobb-Douglas Production function below, to model this relationship Y = @Bo+HKB₁ Where Y= units of output, K= Capital input a) Explain why OLS method of regression analysis will yield spurious results if the analysis was to be based on the specified model above? b) Suggest remedies to correct this anomaly and illustrate your proposed solution on the same. c) Supposed the data collected during the process of research is as follows: OUTPUT (Y) CAPITAL K 20 16 9 5 7 8 13 6 18 16 9 8 Explain the implication of your analysis based on your answer in (ii) and illustrate. d) Perform a linear regression analysis and interpret your results and test for significance of regression e) How Much Variation in the dependent variation has been explained in the model? f) Suggest atleast for conditions to be met for your results in d) to be relied upon.
Transcribed Image Text:QUESTION ONE Supposing you are a researcher studying the role of factor combination on output of firms in the pharmaceutical industries. You pick out labor and capital as the proxies for the input factors. To do you econometric analysis, you pick out the Cobb-Douglas Production function below, to model this relationship Y = @Bo+HKB₁ Where Y= units of output, K= Capital input a) Explain why OLS method of regression analysis will yield spurious results if the analysis was to be based on the specified model above? b) Suggest remedies to correct this anomaly and illustrate your proposed solution on the same. c) Supposed the data collected during the process of research is as follows: OUTPUT (Y) CAPITAL K 20 16 9 5 7 8 13 6 18 16 9 8 Explain the implication of your analysis based on your answer in (ii) and illustrate. d) Perform a linear regression analysis and interpret your results and test for significance of regression e) How Much Variation in the dependent variation has been explained in the model? f) Suggest atleast for conditions to be met for your results in d) to be relied upon.
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