1.The following data refer to the number of loggers working in a stretch of tropical rainforest.Excluding externalities, the private cost to each logger is $25,000.Logs sell for $1 apiece.

# of loggers. Total Harvest(logs)

0 0

1 40,000

2 75,000

3 105,000

4 130,000

5 150,000

6 165,000

7 175,000

8 180,000

9 182,000

a.What is the number of logging operations in the forest that maximizes total profits in the industry (ignoring externalities)? How much resource rent is generated at this level of harvest?

b.With open access to the forest, how many folks will wind up logging?With open access, what is the resource rent earned by the loggers?

c.Which of the following are externalities associated with logging?

i.Loss of genetic material for medical or agricultural applications

ii.Low wages for forestry workers

iii.Release of carbon-dioxide stored in the "carbon sink" of the forest

iv.Building of roads by the companies to access timber

d.Suppose the total externalities associated with deforestation could be valued at $10,000 per operation. Now what is the efficient number of operators? The open access number of operators?

e.Suppose access to the forest is controlled by a (perfectly enforced) fee system. What fee would have to be charged to insure an efficient harvest level?

f.A major problem with the management of many renewable resources is that the harvesting capacity in use exceeds the harvest capacity actually needed - there are too many boats fishing and too many loggers logging.Why is the harvest overcapacity problem so prevalent?Provide a solution to alleviate the overcapacity problem.