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What is Monopolistic Exploitation and How to remove it?

Here, we understand the concept of Monopolistic Exploitation and How to remove it in detail with figure.

What is Monopolistic Exploitation and how to remove it?
First, we discuss about Monopolistic Exploitation in detailed.
Monopolistic Exploitation:
As we know, when there is perfect competition in the product and factor market both, demand curve facing every firm is horizontal that is perfectly elastic in nature and marginal revenue is equal to price of the product. Labour is paid the value of the marginal product. It clearly indicates there is no exploitation.
But, when we look under conditions of imperfect competition in the product market, marginal revenue is less than price. Marginal revenue product is less than the value of marginal product. Here, profit maximising firm pays according to marginal revenue product, labour gets less than the value of marginal product. This exploitation of labour is known as - 'monopolistic exploitation.'
As shown in above figure, average wage and marginal wage (AW = MW) shown by horizontal line equal to wage rate OW. At this wage rate ON quantity of labour is employed.
Wage rate OW or BN is equal to marginal revenue product of labour but less than value of marginal product by AB which is the magnitude of exploitation of labour.
How to remove exploitation?
Exploitation of labour can be removed by two agencies that is
  1. Government.
  2. Trade Union.
It may be noted that monopolistic exploitation of labour arises from the monopoly power of the employer, it cannot be removed through raising wage rates either by the Government or by the trade unions.
For eg- This both agencies succeed in compelling the employers to pay high wages, they can counter react by employing smaller number of workers to equate the new high wage rate with the marginal revenue product of labour.
What is Monopolistic Exploitation?
Perfect Competition
Product Market
Factor Market
Horizontal Demand Curve
Perfectly elastic in nature
Marginal Revenue.
Exploitation of Labour - Monopolistic Exploitation.
Tech writer at NewsandStory
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