1. Draw a correctly labeled graph for Company Kappa. Label the axes and:

Profit-maximizing price (PE)

Profit-maximizing quantity (QE)

Socially optimal quantity (Qso)

Why would this firm continue to operate despite its economic losses?

Shade the area of consumer surplus.

Assume this monopolist became able to perfectly price discriminate. Identify if the following would increase, decrease, or remain constant:

The firm's profit-maximizing quantity of output

Consumer surplus

Company Kappa hires in a perfectly competitive labor market. Draw a correctly labeled labor market graph, labeling the axes, equilibrium wage (We), and equilibrium quantity of labor employed (QE).

The government funds a free training program for labor. Illustrate the effect of this training programonly on the graph from part (e).

Will the quantity of labor employed increase, decrease, or stay the same?