HW # 1 2009 - HW #1 ANSWERS The graph below helps to answer...

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HW #1 A NSWERS     The graph below helps to answer the questions.    G(t)V(t)SINGLE STAND OF TREESTIME (year)VOLUMEVALUEPV @10%% CHANGE in V(t) G(t) =  tree volume0    0 MBF   $ 0$0----price = $10/MBF1    5    5045.45 InfinityV(t) = price*G(t) 2    8  8066.12 60no harvest costs3   10  10075.13 25no aesthetic value4   11  110 4   11  110 75.13 75.13 10 10 no site value5   11.5  11571.41 4.56   11.6  11665.48 >07   11.4  11458.50 -1.78   11  11051.32 -3.5 Questions 1. Does the growth schedule (relationship between age and timber volume) seem to  make biological sense? Yes, the growth curve exhibit diminishing returns to the environment (or time in the environment) and shows a  size limit or ‘carrying capacity.’  Both of these ideas make biological (and economic) sense and are observed in  the field. 2. Assuming the goal is to maximize the present value of the timber stand, when (what  year) should the trees be harvested?  Use an interest rate of 10%. The optimal time to cut is at year 4 (t* = 4 yrs.)  This is the calculation a rational forest owner would make.  The objective is max PV of stand by picking t = age of timber at harvest; or max V(t)/(l+r)
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This note was uploaded on 05/03/2009 for the course ECON 478 taught by Professor Staff during the Spring '08 term at University of Arizona- Tucson.

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HW # 1 2009 - HW #1 ANSWERS The graph below helps to answer...

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