calculate the annual cost and present value, Macroeconomics

Assignment Help:

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?)


Related Discussions:- calculate the annual cost and present value

Factors you would examine in your research, Identify a generic organization...

Identify a generic organization (e.g., manufacturing plant, hospital, educational institution). You will use this same organization in your Final Project. Assume that you are part

Potato chip industry in the northwest, In 2007, the potato chip industry in...

In 2007, the potato chip industry in the Northwest was competitively structured and in long-run competitive equilibrium; firms were earning a normal rate of return and were competi

Trade, What is the difference between heckscher_olin theory and comparative...

What is the difference between heckscher_olin theory and comparative theory

Illustrate an example of consumer price index, Illustrate an example of Con...

Illustrate an example of Consumer Price Index For instance, if we spend twice as much on apples as on pears, apples would have twice the weight in basket. The precise details o

What are the important aspects in tracking the macro-economy, What are the ...

What are the important aspects in tracking the macro-economy? Important aspects in tracking the macro-economy: a. How economists utilizes aggregate measures to track the pre

Illustrate the policy - beggar my neighbour, Illustrate the policy - Beggar...

Illustrate the policy - Beggar my neighbour 'Beggar my neighbour' policies are government policies which attempt to gain a competitive benefit at the expense of other countries

Online homework, I want you to do online homework as you did before on apl...

I want you to do online homework as you did before on aplia.com All questions are 10. They are in Aggregate Demand and Aggregate Supply The deadline within 24 hours. Please do

Gdp, The following is the information from the national income accounts for...

The following is the information from the national income accounts for a hypothetical country: GDP Rs. 6000.00 Gross Investment Rs. 800.00 Net Investment Rs. 200.00 Consumption Rs.

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd