Explain what is needed for optimal harvesting of a forest. How do changes in economic incentives and structures affect present and future decisions?
What will be an ideal response?
Optimal harvesting of trees in a forest involves understanding the growth rate of tress in those cases in which property rights are clear and enforceable. For example, trees may grow at a slow rate during the first 50 years, then grow at a fast rate from 50 to 100 years, and grow at a slow or zero rate thereafter. A lumber company will have a strong profit incentive to harvest young trees sometime during the fast growth period because it will produce the most wood in the least amount of time. Of course market demand conditions and the cost of harvesting will affect the precise year for optimal harvesting that produces the greatest net benefits for the company.
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Suppose the observed annual quantity of steel exchanged in the European market is 30 million metric tons, and the observed market price is 90 euros per ton. If the price elasticity of demand for steel is -0.3 in Europe, what is an appropriate value for the price coefficient (b) in a linear demand function ?
A. b = -0.9 B. b = 0.9 C.b = 0.1 D. b = -0.1
The large increase in the excess reserves held by the commercial banking system during the second half of 2008,
a. increases the likelihood of a sharp contraction in the money supply, which would increase the length and severity of the recession. b. increases the likelihood of a rapid increase in the money supply, potentially leading to future inflation. c. is merely a continuation of the trend present since 1990. d. reduces the ability of banks to extend additional loans.