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ECON 3730 The Origins of International Inequality - University of Guelph

Question 1: Describe in what sense the carbon sequestering services that a forest provides fit the characteristics of a public good

Solution - 1(a)
There are 2 basictraits of a public good. These traitsinvolve non-excludable and non-rival in devouring. Explanation of these two is given below:

1. Non-excludable
Public goods are known as non-excludable. This refers to that, no one can be omitted from the use of public goods. For the sample, the lighting of street is a public good, and in this, no one can be omitted from help of street lights. (Watkins, S.L., 2015)

2. Non-rivalry
Another type of Public goods is non-rival in use or consumption. This gives that the use or consumption of a public good by anyone does not minimize the number or amountready for use to other ones. For sample, if a human being is taking pleasure from the light used in the street, that person does not minimize the power to act of another one to take benefit of the street light. (Watkins, S.L., 2015)

Public goods are very different from private goods by these two traits. The first one is, they display the goods of being the type of non-exclusive. That is, it is very difficult, or we can say it impossible to saveone from using the public good. The second type of property of the pubic goods is that those are non-rival. For that reason, use of the public good by one human being does not minimize the amount or quantity of utility those a second human being can take from the public good. (JIN, W., WEN, B. and QIN, G., 2006). arrangement of public goods needs the composite activity of all those singular persons in our society who request the public good. nevertheless, due to public goods are very non-exclusive and alsonon-rival, markets which are very competitive are unable to givewith regard to the welfare of mankind, optimal levels of public good facility. Thus, facility of public goods needs a technique for making sure that everyone in society gives his or her equal and proper share for giving the public good. (Merlo, M. and Briales, E.R., 2000)

The global type of atmosphere gives a variety of services to the populations of the world that have some value related to economic. One service that includesis to regulate the climate. (Chichilnisky, G. and Heal, G., 1998). The regulation of climateworks is both non-rival public goods and non-exclusive public goods as well and that is why it can be given as a genuinetype of public good (Sandler and Sargent 1995). Another type of service of theforests to act as carbon sinks can be considered as a Public Good as the atmosphere is to absorb mentally the secondary outputs of development of economic. Since there have been some limits on the capability of the atmosphere to absorb wastes materials like carbon dioxide without giving effect to other atmospheric traitslike climate regulation, that is why the forest is considered as carbon sink.This absorbing service of carbon dioxide inthe atmosphere isconsidered as rival and based on bottleneck. In the case of carbon sequestration, it has enhanced to investigate the favorable circumstances for climate change mitigation.In response or result to authentic, government, commercial, business, and singular's commitments to minimize or reduce the carbon dioxide discharge or emissions, carbon is nowadays a priced or valued commodity of environmental in the global type marketplace. Carbon dioxide is naturally taken or captured by the forest trees and woods through chemical, biological and physical processes, that make it to the making or creation of a pure type public good (Bruce et al. 1996).

Carbon back talk in forests is calculated or estimated by using the technique or methodology mentioned in Brown (1997) whichpermits estimating or calculating biomass density according to the existing volume per hectare each year. Data that require is per hectare trees with a minimum diameter of 10cm. For calculation of biomass in the forest, equation is given below (Brown, 1997):

B (t/ha) = V10 . δ . BEF

where B is above - ground biomass per hectarein a forest.
δ is the density of wood,
BEF is the biomass expansion factor and
V10 is timber volume per hectare with dbh>10 cm6

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Question: Why can we not rely on the private market system to provide efficient quantities of public goods like carbon sequestering?

Solution 1(b)

we cannot rely on the private market system to provide efficient quantities of public goods like carbon sequestering because, it is not supporting the following conditions (Memedovic, O. ed., 2008):
1. Development assistance
2. Other international action and activity by the government agencies
3. Developing the country financing

Use Hanzlik formula to calculate the annual allowable cut initially.

Solution 2(a)

AC = I80+ (Vmat / R )
AC is yearly cut
I80is yearly increment
R is age of rotation in years
Vmat is mature stand volume

AC = 15 + 1558 / 82
AC = 34

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Use Hanzlik formula to calculate the annual allowable cut after all the old growth has been harvested.

Solution 2(b)

AC = I + {(Ga - Gr) / R}
Here,
I is yearly increment,
Ga is growing stock which is actual,
Gr is growing stock which is desired and
R is age of rotation in years.

AC = 15+ (2214-1558) / 82
AC = 23

What is the fall down effect and what is the suggested method to deal with the fall down effect?

Solution 2(c)

The reduction or minimization in annual or yearly yield that happens at the level at which the basic forest is bring about is known as the fall-down effect, and it put forward the major problems for the milling type industry that looks for a consistent flow of the timber. it could be minimized or avoided by approaching the time period of improvement to the basic or normal forest.

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Question: A firm developing an uneven-aged age stand management with 3 age classes of trees. The land is currently bare and will require planting costs today of $4500. It predicts that after the development period of 90 years, it will earn a stumpage value of $33000 and have planting costs of $350 every 30 years forever. Using discount rate is 3%, show the present value formula.

Solution 3

Inequality.jpg

Here,R is rotation length in years,
E is cost of stand establishment,
A is net cost,
I is intermediate cost,
Y p, r is yield which is expected,
Pp is product price,
N is product quantity,
Ch is selling cost and
R is interest rate.

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