Question: 1. In the multiple regression equation
Explain how you will test the joint hypothesis β1 = β2 and β3 = 1.
2. The following regression equation is estimated as a production function
cov(bK , bL) = - 0.044. The sample size is 40. Test the following hypotheses at the 5% level of significance.
(a) bK = bL.
(b) There are constant returns to scale.