Explain how each of the following changes affect the Fisher rotation interval and Faustmann rotation interval for trees.
i) An increase in planting cost
ii) An increase in the net price of timber
iii) An increase in soil erosion on deforested land due to climate change
c Discuss two reasons why the optimal rotation interval achieved through a private market may differ significantly from the socially optimal rotation
(i). An increase in planting cost -
As the planting cost increases the Fisher rotation interval increases and the Faustmann rotation interval gives ambiguous results.
(ii). An increase in the net price of timber -
An increase in the net price of timber affect the fisher rotation interval and Faustmann rotation interval in an adverse way . It decreases the rotation interval.
(iii). An increase in soil erosion on deforested land due to climate change -
An increase in soil erosion causes the increase in crop rotation because on that place where erosion of soil occurs , the fertility of soil from that place gets diminished . Because of which it becomes necessity to rotate crops to another's place where fertility is high.
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