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
Consider two consumers, A and B. A and B both want perfect consumption smoothing (c = cf) and both have no current wealth. However, the two consumers have different income streams.

ABC Sports, a store that sells various types of sports clothing and other sports items, is planning to introduce a new design of Arizona Diamondbacks' baseball caps. A consultant h

using a graph of the classical labour market, illustrate the effects of a real wage existing in the market that is lower than the equilibruim real wage.what will eventually happen

During the year, Calabash Clinic made a $50,000 cash payment toward its bank loan which it had previously recorded; $40,000 was for principal, and $10,000 was to pay the full amoun

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

State about the international capital flow An international capital flow is defined as movement of money for the purpose of speculation or investment between countries. It inc

Frovea's currency is called the fromark, and Olympia's currency is called the olymark. In the market in which fromarks and olymarks are traded for each other, the supply of and dem


Determine the example of Currency inside banks is not money An example may also illustrate this important fact: Eric has 100 euro - this amount is obviously part of the

What is the emerging market economy According to Investopedia, Antoine W. Van Agtmael of International Finance Corporation of the World Bank first mentioned the term emerging m