Software is expensive to make, it requires a big upfront expense, but once it's done it is near costless to copy and distribute online. This suggests that software companies face high and substantial fixed costs and zero marginal cost (exactly zero rather than small, for simplicity). Due to differentiated software features and copyright laws, each software company enjoys market power when selling its product.

(a) Draw a diagram to illustrate the software maker's pricing and sales decision, with the aforementioned cost structure.

(b) Software companies are very concerned about software piracy. If piracy is rampant, they know they will face a demand curve for their software that is flat at marginal cost, as if the market were competitive. What are the consequences of this risk for their profitability and their decision to make the software in the first place?