The Madison Abigail Corporation is a profit-maximizing monopolist. They sell a patented drug that creates tardiness in students. They earn an economic profit.

A. Draw a correctly labeled graph that shows each of the following.

i) output and price of the drug

ii) area of economic profit

B. Assume that the Madison Abigail Corporation hires its workers in a perfectly competitive labor market at a wage of $30 per hour.

i) Draw a correctly labeled side by side graph that shows the labor supply and demand curves for the market and the firm. Be sure to indicate the profit-maximizing quantity of labor for Madison Abigail Corporation.

C. Suppose that the market wage now falls to $25 per hour. Show on your diagram in B how each of the following would be affected

i) the supply of labor to the firm

ii) the amount of labor they would hire.

D. Given the lower wage rate, indicate how each of the following would change.

i) total fixed cost

ii) marginal cost

iii) the price of the drug