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Review of slide 4 (MSY)

Review of slide 4 (MSY). slope of ray = average volume (column (3), p.222) slope of tangent = annual increase or marginal growth (column (4), p.222)

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Review of slide 4 (MSY)

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  1. Review of slide 4 (MSY) • slope of ray = average volume (column (3), p.222) • slope of tangent = annual increase or marginal growth (column (4), p.222) • Through the origin, draw a ray that is tangent to growth function. It has the maximum average volume (27.7 cu ft/yr) which equals marginal growth (30 cu ft/yr), in year 60 (MSY) • This yields the largest volume over 600 years

  2. Review of slides 6-8 (optimal rotation interval t*) • We maximize the present value of net benefits of the forest with respect to the time period of harvest • We wait to harvest until next year • We harvest when (V0 + ΔV – C + S)/(1+r) = (V0 – C + S) ΔV = (V0 – C + S)r MB of waiting (value of new growth) = MC of waiting (lost interest on total revenue or net benefits)

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