8. Based on the production function parameter estimates reported in Table 7.4: a

Question

8. Based on the production function parameter estimates reported in Table 7.4: a. Which industry (or industries) appears to exhibiting constant returns to scale? (Ignore the issue statistical significance.) b. Which industry comes closest to exhibiting constant returns to scale? c. In which industry will a given percentage increase in captial result in the largest percentage increase in output? d. In what industry will a given percentage increase in production workers result in the largest percentage increase in output? INDUSTRY CAPITAL PRODUCTION NONPRODUCTION SUM OF ELASTICITY WORKER ELASTICITY WORKER ELASTICITY ELASTICITIES FOOD AND BEVERAGES .555 .439 .076 1.070* (.121) (.128) (.037) (.021) TEXTILES .121 .549 .335 1.004 (.173) (.216) (.086) (.024) FURNITURE .205 .802 .103 1.109* (.153) (.186) (.079) (.051) PETROLEUM .308 .546 .093 .947 (.112) (.222) (.168) (.045) STONE, CLAY, ETC .632 .032 .366 1.029 (.105) (.224) (.201) (.045) PRIMARY METALS .371 .077 .509 .958 (.103) (.188) (.164) (.035)

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which industry (or industries) appears to exhibiting constant returns to scale?

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