EC120 (OC)
ASSIGN 5(C) - SA
SHORT ANSWER
1.
The environmental degradation of natural resources is much more prevalent in
countries with a long history of communist rule. Using your understanding of
common resources explain this phenomenon. (3 marks)


Endangered species are a common resource property as it is considered a scarce
resource where nobody has an exclusive claim. They are threatened by extinction
which is why is it considered scarce. It provides tangible results and we manage it as
a community because we co-exist with animals. If our society acts selfish without
consideration of these endangered species, it is possible that it can damage the
common good for everyone.
Countries with a long history of communist rule supports the idea in which a
system’s goods are owned in common and are disposed when it is needed. It
eliminates private property, which means that these endangered species are a free
for all, which does not protect the animals and raises the chances of people killing
them recklessly as there are no laws enforced. The communist rule focuses more on
equality of humans and their needs as a society rather than thinking about the better
good of the environment and long term effects as a whole.
Output (Hundreds
of documents
delivered per
month)
0
Fixed
Cost
Variable
Cost
Total
Cost
Average
Fixed
Cost
Average
Variable
Cost
Average
Total
Cost
Marginal
Cost
1850
0
1850
0
0
0
0
1
1850
400
2250
1850
400
2250
400
2
1850
850
2700
925
425
1350
450
3
1850
1350
617
450
1067
500
4
1850
1900
3200
3750
(rounded
(rounded
)
)
463
475
938
(rounded
(rounded
)
)
550
5
1850
2500
4350
370
500
870
600
6
1850
3200
5050
308
533
842
700
(rounded
(rounded
(rounded
)
)
)
EC120 (OC)
7
8
ASSIGN 5(C) - SA
1850
1850
4100
5400
5950
7250
264
586
(rounded
(rounded
)
)
231
675
850
900
906
1300
(rounded
)
9
10
1850
1850
7300
9800
9150
11650
206
811
1017
(rounded
(rounded
(rounded
)
)
)
185
980
1165
1900
2500
2. A courier service in Calgary, called Hills and Deliverables, has recently started to deliver
mail between downtown office buildings by bicycle. Deliverables is a small company that
has several contracts with large oil and gas firms, law firms and brokerage houses. The
owner rents a small room in an office building downtown for $1600 a month and leases
three bicycles from a local bicycle store for $250 a month (this includes all bicycle
maintenance). The cost structure for the firm is reflected in the table above.
a) Fill in all the missing blanks in the table. (6 marks)
Continued on the next page…
b) Assuming that Hills and Deliverables pays all of its workers the same wage, is marginal
product of labour decreasing over any range of output? Why or why not? (3 marks)

Yes, marginal product of labour decreases as more output is added. According to the
table, marginal cost increased, therefore since marginal labour is the mirror of
marginal cost, it will decrease. If marginal cost rises, marginal product will fall, and if
marginal cost falls, marginal product will rise. Therefore, in this situation, marginal
product of labour will decrease as more output is added, because marginal cost
increases as more output is added and it is a mirror effect.