WeSpeak4U is the only provider of language translation services. It is currently experiencing economic losses.

(a) Draw a correctly and completely labeled graph for WeSpeak4U, showing:

(i) the loss-minimizing price, labeled Pm

(ii) the loss-minimizing quantity, labeled Qm

(iii) the area of economic losses, shaded

(iv) the allocatively efficient quantity, labeled Qe

(b) WeSpeak4U, in an effort to reduce economic losses, raises its price above Pm.

(i) On the graph from part (a), draw and label this new price level as Pm₁.

(ii) At the new price of Pm₁, will WeSpeak4U's total revenue decrease, increase, or stay the same? Explain.

(iii) Will the new price help WeSpeak4U reduce its economic losses?

(c) The government provides WeSpeak4U with a lump-sum subsidy. Answer the following questions for the short run:

(i) What will happen to WeSpeak4U's marginal costs?

(ii) Will the deadweight loss decrease, increase, or stay the same? Explain.

(iii) Will the economic losses of WeSpeak4U decrease, increase, or stay the same?