Managerial Economics: Applications, Strategy and Tactics 12th Edition by James McGuigan, Charles Moyer, Frederick Harris

Exercise 8

Based on the production function parameter estimates reported in Table:
a. Which industry (or industries) appears to exhibit decreasing returns to scale (Ignore the issue of statistical significance.)
b. Which industry comes closest to exhibiting constant returns to scale
c. In which industry will a given percentage increase in capital 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
Table PRODUCTION ELASTICITIES FOR SEVERAL INDUSTRIES
Number in parentheses below each elasticity coefficient is the standard error.
*Significantly greater than 1.0 at the 0.05 level (one-tailed test).
Source: John R. Moroney, "Cobb-Douglas Production Functions and Returns to Scale in U.S. Manufacturing Industry," Western Economic Journal 6, no. 1 (December 1967), Table 1, p. 46.