A natural resource extraction firm monopolizes the market in Australia.

a/ Draw a diagram (with ATC, MC, MR and price) showing the firm making a greater than zero economic profit. Explain your working and answer in words. (4 marks)

b/ How could such a firm use economic profits to fund research and development to prevent new entrants in the long run? Explain your working and answer in words. (3 marks)

c/ Evaluate the statement: it is possible that an economic shock would cause the monopoly to experience economic loss (negative economic profit). Answer this by drawing curves and explaining them in words. (5 marks)

d/ single period extraction schedule if the total quantity to be extracted is 20 units, the rate of return is 20%pa the price now is $60 per unit, the price in 1 year is $110 per unit and the marginal extraction cost at both points in time is the same $10 per unit. Explain your working and answer in words. (3 marks)

e/ The extraction period is now extended to 2 periods (with the same total quantity of 20 units) and the final period has double the price and double the extraction cost but the same rate of return as the very first extraction point in time. extraction schedule for this. Explain your working and answer in words. (5 marks)