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
The following Cobb-Douglas production function is used to describe the output generated by a local government maintenance agency. Q = αL β1 K β2 E β3 Where L represents numb

Function given: Qt=A0Lt^6Kt^4, Lt=L0e^.03t, Kt=K0e^.02t 1. Growth of labor is continuously compounded at 3% 2. Growth of Capital is continuously compounded at 2% Solve:

A 415V, 3-phase, 4 wires, star-connected system supplies three resistive loads as shown in Figure. Determine (a) The current in each line and (b) The current in the neutr

We have been looking at just the Additional Marginal Opportunity Costs of our choices. What about the total cost? For example, we see and hear ads all the time about different cell

A system of private property rights A. enhances economic growth by creating incentives to the Fed to maintain stable prices. B. enhances economic growth by increasing the pro

Kate uses a sewing machine to alter and repair clothes for one year in her own small business, Kate's Tailoring. She earns $20,000 during the year for various sewing projects. In t

Draw the supply and demand graph for pizza, then answer the questions below. SUPPLY OF AND DEMAND FOR PIZZA Quantity Supplied Price Quantity Demanded 300 $15.00 100 240 12.00 180 1

How much does GDP rise in each of the following scenarios: 1. During a recession, the government raises unemploymemnt benefits by $100 million. 2. A new US airline purchases

This 24 year 1 quarter period should offer sufficient insight into the short term and long term correlation between the variables. Figure - A graph showing the trend of

Question 1: (a) Outline the three main methods of recruitment. (b) Discuss the advantages & disadvantages of any one method mentioned above.