Question One Hishaam's Beverages & Co. (HBC) is a large multinational corporation that specializes
in beverage products. The following production function has been estimated for its new
brand of soft drink, (H3 Chapman).
Q=K0.5 L0.3 M0.2
Where Q = total output (millions of gallons), K = Capital input (thousands of machine-
hours), L = Labour input (thousands of labour-hours), M = Land input (thousands of
acres)
Last year, HBC allocated $2million in its corporate budget for the production of new
soft drink (H3 chapman) for which was used to purchase productive inputs (K, L, M).
The unit prices of K, L, & M were N100, N25, and N200, respectively
Required:
A. HBC last year used its operating budget to purchase 3,500 machine-hours of
capital, 50,000 man-hours of labour and 2000 acres of land. How many gallons
of the new soft drink did HBC produce
B. This year, HBC, decided to hire, 1,500 additional machine-hours of capital, but
did not increase its operating budget. The number of acres used remained
constant at 2000. How many man-hours of labour did HBC purchase?
C. How many gallons of the new soft drink will HBC be able to produce with the
new input mix? Compare your answer with your answer to part A. what
conclusion can you draw regarding HBC's operating efficiency?​