1. Estimate the Cobb-Douglas production Q=αLβ1Kβ2, where Q=output; L=Labor input; K=capital input; and α,β1, and β2 are the parameters to be estimated.
2. Test whether the coefficients of capital and labor are statistically significant.
3. Determine the percentage of the variation in output that is “explained” by the regression equation.
4. Determine the labor and capital estimated parameters and give an economic interpretation of each value.
5. determine whether this production function exhibits increasing, decreasing or constant returns to scale, (Ignore the issue of statistical significance.)
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