EC 2808 Assignment 5. Due Thursday, March 31 at the beginning of class (to be handed in). No late assignments will be accepted. 1. The following data refers to the number of logging operations working in a stretch of tropical rainforest. The private cost of a logging operation is $40 thousand per week. The price of logs is $2 per log. Fill in the chart below (complete out to two decimals where needed). Note that Average Harvest, Marginal Revenue, Average Revenue, and Marginal Cost is per logging operation (not logs). # of operation Averag e Harvest (1000 logs) Margina Margina Total Average Margina 1 1 Revenu Revenu 1 Cost Harvest Revenue e ($000) c ($000) ($000) (1000 ($000) logs) Total Cost (5000) 45 90 90 0 1 2 3 4 5 6 7 8 Total Harves t (1000 logs) 0 45 80 105 123 140 150 155 158 160 161 45 40 35 30,7 as as aa 19.7 17.7. 1 210 246 280 300 310 36 320 322 9 10 a) What is the efficient number of operations? How much total resource rent (i.e., profit) is generated at this level of harvest? 4 b) What is the open access number of operations? What is the resource rent at this level? c) How does this problem reflect the tragedy of the commons? In other words, why do people exploit open access resources, and what is the tragedy"? d) What are some externalities associated with logging? e) Suppose the total externalities associated with deforestation could be valued at $20,000 per operation. What is the efficient number of operations now? What is the open access number of operations? f) Suppose access to the forest is controlled by a fee system. What weekly fee would have to be charged to ensure the efficient harvest level that you found in part e? EC 2808 Assignment 5. Due Thursday, March 31 at the beginning of class (to be handed in). No late assignments will be accepted. 1. The following data refers to the number of logging operations working in a stretch of tropical rainforest. The private cost of a logging operation is $40 thousand per week. The price of logs is $2 per log. Fill in the chart below (complete out to two decimals where needed). Note that Average Harvest, Marginal Revenue, Average Revenue, and Marginal Cost is per logging operation (not logs). # of operation Averag e Harvest (1000 logs) Margina Margina Total Average Margina 1 1 Revenu Revenu 1 Cost Harvest Revenue e ($000) c ($000) ($000) (1000 ($000) logs) Total Cost (5000) 45 90 90 0 1 2 3 4 5 6 7 8 Total Harves t (1000 logs) 0 45 80 105 123 140 150 155 158 160 161 45 40 35 30,7 as as aa 19.7 17.7. 1 210 246 280 300 310 36 320 322 9 10 a) What is the efficient number of operations? How much total resource rent (i.e., profit) is generated at this level of harvest? 4 b) What is the open access number of operations? What is the resource rent at this level? c) How does this problem reflect the tragedy of the commons? In other words, why do people exploit open access resources, and what is the tragedy"? d) What are some externalities associated with logging? e) Suppose the total externalities associated with deforestation could be valued at $20,000 per operation. What is the efficient number of operations now? What is the open access number of operations? f) Suppose access to the forest is controlled by a fee system. What weekly fee would have to be charged to ensure the efficient harvest level that you found in part e
