Question
10 marks) Suppose that the production process of cellphones can be described by the following production technology: Y t = A t K t N
10 marks) Suppose that the production process of cellphones can be described by the following production technology:
Yt = AtKt N 1t ,
in which Yt is the number of cellphones produced at time t, At is the total factor productivity in producing Yt, Kt is the amount of physical capital used in production, Nt is the number of hours worked by employees in the cellphone industry, and is a parameter that measures the importance of capital in production. Suppose that firms in the cellphone industry engage in perfectly competitive markets (for goods and inputs), taking the price of cellphones (Pt), rt is the cost of capital and the wage rate was given. Use the firm's profit-maximizing condition propose a way to measure using observed data. This is, express as a function of Pt, Wt, Yt, Nt, making sure that this expression is easily measured
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