When estimating a cubic short-run production function $Q = A I ^ { 3 } + B L ^ { 2 }$ using linear regression analysis, you must A) transform the equation into linear form by defining L3 and L2 as L³ and L², respectively. B) suppress the intercept term (regress through the origin). C) convert to logarithms. D) both a and b E) both b and c

Question

Quizplus · Accepted Answer

The equation is already linear in parameters, so there is no need to transform it into linear form. However, the intercept term must be suppressed (regressed through the origin) because the production function passes through the origin (Q = 0 when I = 0 and L = 0).

When Estimating a Cubic Short-Run Production Function Q=AI3+BL2Q = A I ^ { 3 } + B L ^ { 2 }Q=AI3+BL2

When Estimating a Cubic Short-Run Production Function $Q = A I ^ { 3 } + B L ^ { 2 }$