Wolverine and Spartan both have populations of 40,000, the same level of human capital and the same natural resources. Both have the same production function with constant returns to scale and diminishing returns. Spartan has 10,000 machines and Wolverine has 5,000 machines.
a. Which country will have a bigger increase in productivity from an additional 100 machines, and no other changes? Wolverine or Spartan (circle)
b. Draw a graph showing the effect of the increase of the 100 new machines on the productivity. Be sure to label the productivity curve, the initial K/L and Y/L and the changes to K/L and Y/L for both Wolverine and Spartan.