Question

Alex and Ben are both loggers wanting to harvest timber from the same forest. Alex prefers to harvest and replant at a sustainable rate; Ben wants to harvest as many trees as possible to maximize short-run profit and then move on. They face the same production costs. The forest is more likely to be harvested and replanted at a sustainable rate if

Multiple Choice

• property rights are weak or nonexistent.

• Ben is given sole ownership of the property.

• property rights are well defined and enforced.

• there is no government protection of property rights and the parties can negotiate a settlement.

Answer 1

Correct option is (3).

When property rights are weak or non-existent, common resources are depleted at unsustainable rate. But if property rights are firmly enforced, common resources are used in the optimally sustainable manner.