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Problem on Rate of Exploitation

The difference among the value of marginal product of the labor and average wage rate will tend to be maximum when a firm: (i) Joins significant market power in output market and monopsony power in the labor market, however does not wage discriminate. (ii) Is a pure competitor in the output market and practices the maximum wage discrimination. (iii) Practices outsourcing across international borders as labor costs abroad are lower. (iv) Is a pure competitor whenever hiring labor and perfectly price discriminates in the output markets. (v) Lacks monopsony power in labor market however has important power in output market.

Choose the right answer from the above options.

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