Abstract

w

) less than the marginal revenue product (

MRP

). This feature has been explained as a synonym of the single firm exploiting its workers since its creation by Joan Robinson

[1]

. By using a simple standard efficiency wage model of Yellen

[2]

, this paper examines the conventional wisdom by showing that the firm pays workers

w

in the equilibrium of full employment, but paradoxically pays them

w=MRP

in the equilibrium of involuntary unemployment. According to the conventional wisdom that the result of

w

implies that workers are exploited by the firm, this f inding indicates that the firm does not exploit its employees (

w=MRP

) when there are involuntary unemployed workers queuing for jobs, but paradoxically exploits workers (

w

) when there are no workers queuing for jobs. The finding is obviously counter-intuitive. This counter-intuitive finding reveals that the key feature of

w

in monopsony cannot be regarded as a proper theoretical basis for the issue of labor exploitation.