Resource Economics 263 Problem Set #7
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Resource Economics 263
Problem Set #7, 15 points
Due: December 1, 2022, 4 pm
Answer the following questions online using the following link on the Moodle course page.
(1) Explain what is meant by the optimal rotation pattern for managing timber harvests on a parcel of land? [3 points]
(2) The graph below depicts the optimal rotation age for timber production on a plot of land. In the graph, ∆V is the value of the additional growth of timber if the stand is left to grow another year; r is the discount rate; V0 is the monetary value of timber if harvested this year; C is harvest cost; and S is the present value of all future timber harvests. Explain how the optimal rotation age is determined in terms of the marginal benefit and marginal cost of waiting to harvest the timber. [3 points]
$
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r[(V0 – C) + S] |
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∆V |
Time (years)
t*
(3) Below is a graph of estimated accumulated sequestered carbon on a tract of pine trees. The solid line is the estimate of sequestered carbon as a function of the age of the stand, assuming that it is never harvested. The dotted line is the estimate of sequestered carbon if the tract is harvested every 40 or so years. Use this graph to explain how it is possible that more carbon can be sequestered if the forest is managed for timber production than if it is never harvested. [3 points]
Richard Newell, Rob Stavins. 2000. “Climate change and forest sinks: Factors affecting the costs of carbon sequestration.” Journal of Environmental Economics and Management.
(4) Explain how harvesting an old growth forest is like exploiting a nonrenewable mineral resource. In addition, describe two ways in which harvesting old growth timber is not like exploiting a nonrenewable mineral resource. [3 points]
(5) Below is a graph of the remaining stock of old growth forests in a country and the per-hectare benefits of alternative uses of the land. q0 is the total number of hectares of remaining old growth forest. The per-hectare benefit of harvesting the timber is shown, as well as the per-hectare benefit of the remaining standing old growth. Explain how the efficient number of hectares of old growth forests to preserve is determined. [3 points]
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Per-hectare benefit of harvesting old growth |
hectares
2022-12-01