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.

1. Donny and Sunshine both increase their capital equipment by one mixer and one fryer. Which shop will benefit the most from expansion?

a. Donny, because his workers were not as busy to start with
b. The local weight-loss clinic
c. Sunshine, because she was producing more to start with
d. The shops will benefit equally because they are purchasing the same equipment

2. Which of the following is the most realistic expectation Donny should have about how much his production will increase with the new equipment?

a. At least 100 dozen
b. About 50 dozen
c. About 80 dozen

3. Which of the following is the most realistic expectation Sunshine should have about how much her production will increase?

a. About 50 dozen
b. More than 80 dozen
c. At least 100 dozen

1. If Donny and Sunshine both increase their capital equipment by one mixer and one fryer, the shop that will benefit the most from the expansion is a. Donny, because his workers were not as busy to start with.

2. The most realistic expectation that Donny should have about increased production with the new equipment is a. At least 100 dozen.

3. The most realistic expectation that Sunshine should have about increased production with the new equipment is c. At least 100 dozen.

Productive Efficiency

Based on the economic concept of productive efficiency, Sunshine cannot produce more than 90 dozen doughnuts per equipment daily, unlike Donny, which can produce 100 dozen doughnuts per equipment daily. When the equipment is increased by both producers, all things remaining equal, the production increases are as follows:

Data and Calculations:

Donny Sunshine

Dozens of doughnuts/per day 100 180

Number of mixer and fryer 1 2

Productivity per equipment set 100 90 (180/2)

Productivity per additional equipment 200 (100 x 2) 270 (90 x 3)

Thus, the conclusion is that Donny is more efficient in producing doughnuts than Sunshine, given that its workers can produce 100 dozen doughnuts per day, using one mixer and one fryer against Sunshine's 180 dozen doughnuts, using two mixers and two fryers.

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