12 - Pic tu re 1 02:20 Forestry Annual value = (PQe-rt C) +...

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Unformatted text preview: Pic tu re 1 02:20 Forestry Annual value = (PQe-rt C) + (PQe-rt C) e-rt + PQ=price x quantity (ie. volume), C=cost to plant trees Faustmann: Maximize profitability (Economists preferred) Private land Max A = Highest profit (highest present value) PQ=rPQ+rA r=interest on sold timber PQ=MB of waiting another year (what trees give for another year of life) rPQ+rA=MC of waiting another year; rA is negligible if PQ>rPQ, then leave trees if PQ=rPQ, then cut trees Basically comparing r to PQ/PQ (see graph below) When % growth rate is rapidly declining Economists cut when growth rate = r Biologists wait longer until growth rate < r, opportunity cost Maximum Sustained Yield: sustain forest, not individual trees Maximize productivity ie. average flow ie. output (biologists preferred) Public land Max Q(t)/t =>Q=Q/t (maximize volume growth) Optimal Q=q/t (highest sustained average growth)...
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12 - Pic tu re 1 02:20 Forestry Annual value = (PQe-rt C) +...

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