Use the following to answer questions 5-7:
Table 13.1
-(Table 13.1) The table shows the quantity of labor demanded at different wage rates. Which of the following statements is TRUE? I. When the market wage is $25 and the firm hires 7 workers, the benefit of hiring the seventh worker is greater than the costs of hiring the seventh worker.
II) When the market wage is $25 and the firm hires 4 workers, the benefit of hiring the fourth worker is less than the costs of hiring the fourth worker.
III) When the market wage is $25 and the firm hires 5 workers, the benefit of hiring the fifth worker on the margin equals the costs on the margin of hiring the fifth worker.
A) I
B) I and II
C) III
D) I and III

Question

Use the following to answer questions 5-7:
Table 13.1 
-(Table 13.1) The table shows the quantity of labor demanded at different wage rates. Which of the following statements is TRUE? I. When the market wage is $25 and the firm hires 7 workers, the benefit of hiring the seventh worker is greater than the costs of hiring the seventh worker.
II) When the market wage is $25 and the firm hires 4 workers, the benefit of hiring the fourth worker is less than the costs of hiring the fourth worker.
III) When the market wage is $25 and the firm hires 5 workers, the benefit of hiring the fifth worker on the margin equals the costs on the margin of hiring the fifth worker.
A) I 
B) I and II 
C) III 
D) I and III

Quizplus · Accepted Answer

According to Table 13.1, at a wage rate of $25, the quantity of labor demanded reaches its maximum at 5 workers. This means that the benefit of hiring the fifth worker on the margin equals the costs on the margin of hiring the fifth worker (statement III). The table also shows that when the firm hires 7 workers at the wage rate of $25, the quantity demanded decreases. Therefore, the benefit of hiring the seventh worker is less than the costs of hiring the seventh worker, making statement I false. Similarly, when the firm hires 4 workers at the wage rate of $25, the table shows that the quantity demanded can still increase by hiring more workers, indicating that the benefit of hiring the fourth worker exceeds the costs of hiring the fourth worker, making statement II false.

Use the Following to Answer Questions 5-7