Question
The benefit of cutting down a forest is $1 million now. The environmental cost of that harvest is $10/year forever. a) (5 points) At a
The benefit of cutting down a forest is $1 million now. The environmental cost of that harvest is $10/year
forever.
a) (5 points) At a 0 percent discount rate, are the benefits of harvesting greater than the costs? Why or
why not?
b) (10 points) The private market discount rate is 4 percent, but the government has decided to use
a social discount rate of 0 percent. What is the opportunity cost associated with using the social
discount rate in this situation? Explain.
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Macroeconomics Principles Applications and Tools
Authors: Arthur O'Sullivan, Steven Sheffrin, Stephen Perez
9th edition
978-0134089027, 134089022, 978-0134420684
