Question

Donny, of Donny's Doughnuts, bakes and sells 100 dozen doughnuts a day using one mixer and one fryer. His rival, Sunshine, of Sunshine's Doughnuts, produces 180 dozen doughnuts a day using two mixers and two fryers. Both shops use the exact same technology to make doughnuts and have the same number of workers and the same size building. Donny and Sunshine both increase their capital equipment by one mixer and one fryer.

Answer 1

Answer:

D. Donny, because his workers are not as busy to start with

Explanation:

Note: The complete question is attached as picture

Based on the information supplied. Both shops use the exact same technology to make doughnuts and have the same number of workers and the same size building. Observation: There are diminishing returns to capital. This means in as much a more capital is added to labor, the marginal products falls.

As there are diminishing returns to capital, Donny will benefit the most as his workers were not as busy to start with.