Question
1.A) Provide a graphical illustration of subsistence agriculture and deforestation where land area deforested is the independent (decision) variable, output (in biomass or $) is
1.A) Provide a graphical illustration of subsistence agriculture and deforestation where land area deforested is the independent (decision) variable, output (in biomass or $) is the dependent variable, marginal product of converted land is horizontal (for simplicity) and marginal costs are increasing. (5 points) B) Define the amount of land deforested where MC=MP1 as the level of deforestation required to provide a subsistence income to the household. (5 points) C) Identify the producer surplus at subsistence. (5 points) D) Suppose a technological innovation (e.g., a hoe) shifts the marginal product curve upward (to MP2) making it possible to reach subsistence at a lower level of deforestation. Show this new level of deforestation on your graph. Is this the result you expect to observe? Why or why not? (5 points)
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