Cobb douglas returns to scale

• [DOC File]Chapter 10: The Theory of Economic Growth

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  Example of Cobb-Douglas production function. If the Cobb-Douglas production specification is used, variables are expressed as an index. (See appendix to chapter 10). Cobb-Douglas Y = A Kb L1-b assumes constant returns to scale. Suppose initially 1.0 = 1.0(1.0 0.25 1.0 0.75) Suppose labor input increases 4% to 1.04, then Y increases to 1.03 (or 3%).

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• [DOC File]Introduction to Quantitative Economics

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  if f(K, L) < f(K, L) < Y Quick check of returns to scale in the case of Cobb-Douglas production functions: add the powers on K and L so if Y = KL then if +  = 1 constant returns to scale, if  +  > 1 increasing returns to scale if  +  < 1 decreasing returns to scale

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• [DOC File]M

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  Notice also that if we have a Cobb-Douglas production function with constant returns to scale, then r = 1 and = 0 so that = 1. It is not difficult to show that in this case, the CES production function takes the familiar Cobb-Douglas constant returns to scale form (apply l'Hôpital's rule to obtain this).

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• [DOC File]Microeconomics, 7e (Pindyck/Rubinfeld)

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  A) The firm experiences increasing returns to scale. B) The firm experiences increasing, constant, and decreasing returns in that order. C) The firm experiences first decreasing, then increasing returns to scale. D) The short-run average cost curve reveals nothing regarding returns to scale. Answer: D. Diff: 2. Section: 7.4

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• [DOC File]Case Study: Intrinsically Linear Models

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  Cobb-Douglas Production Function. Source: C.W. Cobb and P.H. Douglas (1928). “A Theory of Production”, American Economic Review Vol. 18 (Supplement) pp. 139-165. Theoretical Model of Production (Constant Returns to Scale):

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• [DOC File]Econ 604 Advanced Microeconomics

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  Cobb-Douglas functions can exhibit any degree of returns to scale, depending on a and b. f(mK, mL) = A(mK)a(mL)b= Ama+bKaLb = ma+bff(K,L) Thus, if a+b =1, the Cobb-Douglas function exhibits constant returns to scale. a+b>1 implies increasing returns to scale, and a+b

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• [DOC File]Problems with solutions, Intermediate microeconomics ...

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  The Cobb-Douglas production function is given by f(x1,x2)=Ax1ax2b. Which values of a+b will be associated with the different returns to scale? Problem 3. Technology. Find the marginal products, TRS, and find if the function exhibits CRs, IRS, DRS, for the following production functions: x1+2x2 (x1+2x2)0,5. x11/4x3/4. x1+x20,5. Problem 1. Profit ...

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• [DOC File]Econ 604 Advanced Microeconomics

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  Finally, notice the expansion path for this production function. Since the Cobb-Douglas function is homogenous of degree 1 the firm enjoys constant returns to scale, and the expansion path is linear. (Indeed the expansion path would be linear even if the w(v) Question: Suppose v = 12 and w = 4.

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• [DOC File]Study Questions for Intermediate Microeconomics Exam #2

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  For a Cobb-Douglas, sum the exponents: ½ + ¼ = ¾; ¾ is less than 1, so we have decreasing RTS. (ii) For ACME’s production function, derive each of the following in terms of K and L – Average Product of Capital (APK), Average Product of Labor (APL), Marginal Product of Capital (MPK), and Marginal Product of Labor (MPL).

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• [DOC File]Exercise 6 (+additional question) in Mankiw:

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  If it causes output to increase by more than 10 percent, the production function is said to exhibit increasing returns to scale. Why might a production function exhibit increasing or decreasing returns to scale? Problem 3.3: Suppose that an economy’s production function is Cobb-Douglas with parameter alpha=0.3.

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• [DOC File]Cobb-Douglas Handout

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  The Cobb-Douglas production function has the property of constant returns to scale (CRS) – any proportional increase in both inputs results in an equal proportional increase in output; that is, double both L and K inputs and you get double the Y real output. Mathematical proof of this property is reasonably simple.

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• [DOC File]PESR - University of the Punjab

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  3The traditional Cobb-Douglas production function assumes as factors of production labour and capital, and constant returns to scale; i.e. the sum of elasticities of output with respect to labour and capital is equal to one. 4If capital stock is measured at the end of the year, current year investment is used and if capital stock is calculated ...

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• [DOC File]Chapter 10 Multi-Variable Functions

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  Given a Cobb-Douglas production function if b + c = 1 then the function displays constant return to scale. That is, increasing labor and capital by a factor of p causes production to increase by the same factor p. b + c > 1 then the function displays increasing returns to scale.

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• [DOC File]F-test of a linear restriction

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  However another use of this test, is to test whether constant returns to scale applies, whereby a proportionate increase in all inputs, gives a proportionate increase in output. One example is the Cobb-Douglas production function. Constant Returns to Scale In the Cobb-Douglas production function, output is determined by capital and labour.

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