The tree in Karura forest grow such that the volumeof timber at time t can be represented as-Q (t) = 900t + 5ot+ 60t +7¢4(Note that thise trees do not follow a typical biologicalgrowth function). The annual real interest rate is0.19 and each unit of timber Can be sold at a priceof Ksh. 100 net of harvest costs. Assume there is noopport unity Cost of using lond to grow timber-Assume also that at Ě =89 years from beginning of#e trees growtd, Kinyua obtained sole ownership ofthe forest througha surprise bequest ·i) What is the Marginal benefit Minyua would get byHaiting to cut the trees for another year ?O What is the marginal castbe would incurbyWaiting to cut the trees for another year?ii) Should he Wait another year to cut clown the trees ?(v) Assume that the interest rate is different such thatt = 89 is the e xact optimal time to harvest thetrees. Hhatisthe annual interest rate ?Scanned with CamScanner

Volume of timber at time 't' is given by the following function: Q(t) = 900t + 50t2 + 60t3 + 7t4…

The tree in Karura forest grow such that the volume of timber at time t can be represented as 900t + 5ot+ 60t3 +7¢4 Q (t) = (Note that these trees clo not followw a typical biological growth function). The annual real interest rate is 0:19 and each unit of timber Can be sold at a price of Ksh. 100 net of harvest costs. Assume there is no opfort unity Cost of using land to grow tmber . Assume also that at Ě = 89 years from beginning of R trees growth, Kinyua obtoined sole Ownership of the forest threugh a surprise bequest · ) What is the marginal benefit Hinyua would get by H aiting to cut the trees for another year ? i) What is the marginal cast be would incur by Waiting to cut the trees for another year? ii) Should he Wait another year to cut clown the trees ? (N) Assume that the interest rate is different such that t=89 is the exact trees. What is opt imal time to hervest the the annual interest rate ?

The tree in Karura forest grow such that the volume of timber at time t can be represented as 900t + 5ot+ 60t3 +7¢4 Q (t) = (Note that these trees clo not followw a typical biological growth function). The annual real interest rate is 0:19 and each unit of timber Can be sold at a price of Ksh. 100 net of harvest costs. Assume there is no opfort unity Cost of using land to grow tmber . Assume also that at Ě = 89 years from beginning of R trees growth, Kinyua obtoined sole Ownership of the forest threugh a surprise bequest · ) What is the marginal benefit Hinyua would get by H aiting to cut the trees for another year ? i) What is the marginal cast be would incur by Waiting to cut the trees for another year? ii) Should he Wait another year to cut clown the trees ? (N) Assume that the interest rate is different such that t=89 is the exact trees. What is opt imal time to hervest the the annual interest rate ?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

100%

The tree in Karura forest grow such that the volume
of timber at time t can be represented as-
Q (t) = 900t + 5ot+ 60t +7¢4
(Note that thise trees do not follow a typical biological
growth function). The annual real interest rate is
0.19 and each unit of timber Can be sold at a price
of Ksh. 100 net of harvest costs. Assume there is no
opport unity Cost of using lond to grow timber-
Assume also that at Ě =89 years from beginning of
#e trees growtd, Kinyua obtained sole ownership of
the forest through
a surprise bequest ·
i) What is the Marginal benefit Minyua would get by
Haiting to cut the trees for another year ?
O What is the marginal castbe would incur
by
Waiting to cut the trees for another year?
ii) Should he Wait another year to cut clown the trees ?
(v) Assume that the interest rate is different such that
t = 89 is the e xact optimal time to harvest the
trees. Hhat
is
the annual interest rate ?
Scanned with CamScanner

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