a)Please write out the timber operations’ profit function for Faustmann-rotation forestry.
a)Please write out the timber operations’ profit function for Faustmann-rotation forestry.
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(a)Please write out the timber operations’ profit function for Faustmann-rotation forestry.
(b)Derive the first-order condition and write a detailed interpretation of its parts.
(c) Suppose the National Forest Service imposed a “severance tax” on the volume of wood harvested. How would you modify the profit function (Faustmann - rotation)to incorporate this tax? Would the addition of the tax impact the optimal rotation length?
(d) How would you modify the profit function (Faustmann - rotation) to represent a stochastic natural disaster (fire, disease, pest) that could reduce the stumpage value? Would this modification affect the optimal rotation length?
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