Suppose that Kuhn Pharmaceuticals has a patent on the drug, Wondermeditol, until the year 2030. The firm in 2018 was making economic losses due to high production costs.

A. Graph the firm's profit/loss situation in 2018. Shade the area of profit/loss, label Pm and Qm.

B. In 2019, the firm adopts a new technology in its factories which cuts it production costs significantly. Graph the firm's new profit/loss situation in a separate graph. Shade the new area of profit or loss, and identify P2 and Q2. You will need to shift cost curves and should label them ATC1, ATC2, MC1 and MC2 in order to make it clear which costs curves came first.

C. Identify how this change affects the monopoly's price and quantity.