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Question 3: A company logs oldgrowth forest. The firm is small compared to the rest ofthe market and faces a constant price P = 100

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Question 3: A company logs oldgrowth forest. The firm is small compared to the rest ofthe market and faces a constant price P = 100 for the timber that it harvests per hectare of land. The marginal private cost of logging is MC = Q where Q are the hectares of land harvested by the firm. The logging also causes a loss of recreational benefits and greenhouse gas emissions. The marginal cost of greenhouse gases from logging are MCG = 10 and the marginal losses of recreational benefits are MCR = 0.5 Q. What is the socially optimal level of logging? 100 = 1.5Q + 10 (1:60

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