Question

1. You are a public lands manager and must decide which types of use to permit on a section of forest. A timber company would like to harvest timber and estimates that operations would generate $5 million in economic benefits to the state over five years. However, a recent study estimates the societal benefits of outdoor recreation are approximately $1.5 million per year.   

1. [3 pts] What is the opportunity cost of permitting the timber company to log the land for five years? Assume that no public access is permitted while the timber company conducts logging operations.

2. [3 pts] Thinking beyond the five-year time horizon, what impacts would logging have on the future recreation benefits? Write 3-4 sentences describing how recreation consumers' preferences may change given the impacts of logging. Regardless of your response, provide support for your argument.

3. [3 pts] As the manager, how might you coordinate multiple uses across the forest? Write 2-3 sentences.

Answer 1

1.

Opportunity cost of permitting timber company to log the land for 5 years = Foregone soceital benefits from outdoor recreation

Opportunity cost = $1.5 x 5 = $7.5 million

2.

After the five year time period, logging would drastically reduce future recreation benefits, as all outdoor scenic beauty would vanish and benefits become 0

3.

As a manager, it is better to keep the forest intact, as outdoor recreation benefits outweigh revenue from logging over the 5 year period and after 5 years, the benefits from recreation would increase if logging is not done.