AEB 6933
 Spring 1995
 EXERCISE Ell



1. To the table in Exercise FA5, add four more columns of data: EI,
NEI, N2EI and PEI. Then blocking all nine columns as independent
variables, calculate the production function:

 Y = f (N, P,N2,P2NP,EI,NEI,N2EI,PEI)

Compare the R2 values for the two equations and the deviations from
regression (Std Err of Y Est). How do you explain the differences?

2. What would you expect this equation to look like if you set the El
equal to the average El for all farms (3760 from the table in Exercise
FA1)? Do this and compare the resulting equation with the equation
from Exercise FA5. Did you expect the similarity? Explain why this
happens. Solve for maximum production and maximum profit. How do the
quantities of N, P and Y compare with those from Exercise FA5?.

3. Now set El equal to the poorest environments, say El = 2500.
Notice how the equation changes. Solve this equation for maximum
production and maximum profit. Compare resulting values of N, P and Y
with those from the previous equation. Explain the results.

4. Do the same for a high EI, say El = 5000. Compare with the
results of the other production functions.