The economic planning department at international chemicals inc has used regress
ID: 1119410 • Letter: T
Question
The economic planning department at international chemicals inc has used regression analysis to estimate the firm's production function as
ln Q = 3 + .25 ln K + .75 ln L
a. Convert the production function back to its original(Multiplicative or Cobb- Douglas) form. (Hint: Find the antilogarithm of both sides of the equation)
b. If the capital stock is fixed at 16, the price of labor is $200 per unit, and the price of the firm's only product, sulfuric acid, is $10 per unit, determine the rate of labor input that will maximize the firm's profit.
Explanation / Answer
Ln Q = 3 Ln e + .25 Ln K +.75 Ln L
Ln Q = Ln e^3+ Ln K^.25+ Ln L ^ 0.75
Ln Q = Ln{e^3×K^.25×L^.75}
Q =exp (3)× K^25* L^ .75
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