Question: Table 7-1 contains information on the relationship between workers at Acex Manufacturing Company and the wage rate paid to Acex workers. As is evident from the table, a fully effective worker is capable of producing 10 units per hour.

1. Describe two possible reasons why productivity at Acex increases as the wage rises.
2. Use the information provided in the table to determine the number of workers required to produce 10 units per hour at a wage rate of $6 per hour. Enter this value at the top of the third column of the table.
3. Because a fully effective Acex worker is one who produces 10 units per hour, what is the wage cost of hiring enough labor, at $6 per hour, to produce the equivalent of one fully eflective worker? Enter this value at the top of the last column.
4. Fill in the rest of the table using calculations similar to those employed in parts b and c.
5. Suppose the market-clearing wage is $8 per hour. What wage will this firm likely pay its workers? Explain.
6. Describe the labor market problem which will result if all other firms in the market also have efficiency wages which exceed $8.

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