1 The Cobb-Douglas Production Function, Costs, Factor Quantity Employed and Parametric Estimation: A Firm Level Perspective

This paper studies the theoretically internal relationships among the Cobb-Douglas production function, the long-run costs, the short-run costs, and their figures. If the production characteristics of a firm can be represented by the Cobb-Douglas production function, and if the market demand of the firm product can be described by linear demand, we can know the long-run equilibrium production level, the short-run equilibrium production level and the factor quantity employed. In addition, this paper points out differences of estimating the parameters α and α i in the Cobb-Douglas production function. Key words: Cobb-Douglas production function, the long-run cost, the short-run cost, factor quantity employed, consistent estimatio