2.10 Biotech companies employ many highly skilled workers.

a. Suppose the wage rate paid these workers falls, perhaps because more students graduate from college with the necessary skills. In the short run, how does a fall in the wage rate affect the firm’s marginal revenue and marginal cost curves?

b. If each of the biotech companies produces a unique drug so each is a monopoly in its market, how does the fall in wages change the managers’ decisions about the profitmaximizing quantity and price?