calculate the annual cost and present value, Macroeconomics

National Marine Fisheries Service is considering closing a large area of federal waters to fishing in Alaska due to negative interactions of fishing with endangered Steller sea lions (due to capturing of seals in fishing gear and catch of the prey species of the sea lions by fishermen). In doing this, the closures are expected to displace 30 vessels from fishing in the Aleutian Islands, each of which made profits of $100,000 on an annual basis from fishing in these waters. Best estimates are that all 30 of these vessels will find employment in alternative fisheries, but these fisheries will be less profitable - yielding profits of only $50,000 per vessel each year.

a.  Calculate the annual cost to the entire industry from the closures.

b.  Assuming a 10 year planning horizon (t=1,...,10), calculate the present value of these costs using a discount rate of r=.03.

c. At the end of a 10 year period, it is estimated that the closures will result in a growth in the population of Steller sea lions of between 100 and 1000 individuals. Combining this information with your findings in part b, come up with a lower and upper bound on what the mean willingness to pay by society (in period 0 dollars) would need to be per sea lion to overcome these costs.

d.  Suppose a stated preference study of non-use values reveals that the average American is willing to pay a sufficient amount such that when added up over the population, the willingness to pay per sea lion saved exceeds the upper bound you derived in part c. Is it necessarily the case that the fishery closure is justified on the grounds of economic efficiency? (Hint: What if there is a less costly way of achieving the same biological objective?)

Posted Date: 3/28/2013 5:55:46 AM | Location : United States







Related Discussions:- calculate the annual cost and present value, Assignment Help, Ask Question on calculate the annual cost and present value, Get Answer, Expert's Help, calculate the annual cost and present value Discussions

Write discussion on calculate the annual cost and present value
Your posts are moderated
Related Questions
Price 10,9,8,7,6,5,4,3,2,1 QD 0,1,2,3,4,5,6,7,8,9,10 TR? Ed?.

n 2013, approximately 58 percent of the adult population (245 million) was employed, the lowest employment rate in 20 years. If the employment rate increased to the prerecession l

Monetarism This school argues that disturbances within the monetary sector are the principal causes of instability in the economy. According to monetarists, the money supply i

Production Alternatives Type of production A B C D E Automobiles 0 2 4 6 8 Forklifts 30 27 21 12 0 If the economy is at point C, what is the (opportunity) cost of 2 more automobile

what cause keynesian unemployment?

Consider two bonds. Each has a face value of $100 and matures in one year. One has a zero coupon payment, and the other pays $10 per year. A. Explain how the two bonds differ

how to relate macro economics theories with current indian economy

Application of Theory of Consumer Behavior As already discussed earlier, the theory is an important tool to interpret and analyse demand curves. Apart from its usefulness as a

The primary functions of economists are to teach, contribute research and empirical findings and formulate policies. Most of the professional economists are associated with academi

Norms influence behavior conformity among group members. What factors will influence group members to conform to a group's norms, and when will members remain independent? Do indiv