Are the lungs above the diaphragm? Are the lungs muscular?

The diaphragm is a muscular structure that contracts to increase the area of the chest cavity, which creates a negative pressure and forces ambient air to rush into the lung. When the diaphragm relaxes, the chest cavity area shrinks, which pushes air out of the lungs. (You have or will learn about pressures in chemistry) The lung tissue itself is not muscular; rather, blood flow is controlled by smooth muscle on the lungs' vasculature. Expiration is a passive process unless you are forcing air out of your lungs. This may be more information than you were looking for, but you will learn it nonetheless.

Yes, the lungs are located above the diaphragm. The diaphragm is a dome-shaped muscle that separates the chest cavity from the abdominal cavity, and the lungs sit within the chest cavity, above the diaphragm. The lungs themselves are not muscular organs, but they are surrounded by muscles that aid in breathing, such as the diaphragm and intercostal muscles.