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Dough daddy is contemplating the input mix he is currently using to make doughnuts in his doughnut shop. Keeping the same number of workers, if he were to upgrade his deep-fat fryer from the current medium size to a large-sized one, daily output of doughnuts would increase by 200 doughnuts. The additional daily cost of leasing the large rather than the medium fryer would be $25. Alternatively, Doughdaddy could increase output by 400 doughnuts per day by adding another worker to the production process. Each additional worker-day costs him $80. Is Doughdaddy using the cost-minimizing mix of capital and labor to produce doughnuts? If he wants to increase output, should he use relatively more capital or relatively more labor?

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