ASSIGNMENT 4-20 Economics of forests

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Arizona State University *

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Economics

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Feb 20, 2024

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ASSIGNMENT: Economics of forests What was the economic activity that led to most of the destruction of forests in Africa over the period 1990 – 2005? Domestic use for cooking by rural people. What does it mean to say that forests are a multifunctional resource? They provide many functions and resources that can be used in many segments. What is meant by plantation forestry? These are places where trees are planted by people. How is the harvest strategy for trees different from that for fish? The trees are of same age and species, and so it is more controlled. What does the age-volume relationship depict? It shows how much the volume of timber is as a function of time. What is meant by the timber rotation? It is by what amount of time trees are harvested from same plot of land. What are the five economically distinctive features of forests as a resource? Multifunctional, longer time lag between harvest and planting, entire forests are harvested, more controlled, land has multiple uses. How is the harvest strategy for trees different from that for fish? And they are of the same type and species from where they are harvested at the same time, Which is not true for fisheries. How does the growth equation for a forest differ from that for a fishery? It is for the time since planting, not stock of fish. What is the objective when a timber company maximizes the discounted present value of the first stand? That the trees reach their maximum profitable each. What is the objective when a timber company maximizes the soil expected valued? That harvests on that land can continue forever. 1
Explain how those objectives are different. First stand is more short term, depending on the current harvest level, while soil is more long term. Do those two objectives generate the same or different rotations, even using the same discount rate? Why? No, since we only consider the value of land in soil, while for first stand we are more short term focused, What is meant by “salvage value”? It is the value of land after harvest. How does using a lower interest rate affect the optimal rotation under the objective of maximizing soil expected value? We will have a longer time period of rotation. How does timber harvesting under the criterion of maximizing the soil expected value relate to the steady-state analysis we saw in the management of a fishery? Here, we are trying to steady state harvest from the soil. Under that objective of maximizing the soil expected value, the rule for optimally harvesting trees can be expressed as an annual rule for harvesting or not harvesting that year. What is that annual rule? Marginal benefit next year from waiting and not harvesting this year should equal the marginal cost next year of waiting and not harvesting this year What is meant by non-consumptive as opposed to consumptive uses of a forest? What are some examples of non-consumptive uses? A consumptive use is where the resource gets used up, such as timber, and for non- consumptive it is not used up, such as recreational. When you add the objective of managing a forest for non-consumptive uses such as recreation and habitat as well as for timber supply, does that change the optimal rotation? How? 2
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