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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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- Economics, old growth, growth Biologist, sustained average growth, max average volume