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In: Economics

A natural oil exploration company owns a land area of 8,500km2, which is a natural forest....

A natural oil exploration company owns a land area of 8,500km2, which is a natural forest. Management of the company is deciding to either use the land for crude oil exploration or maintain it as a forest reserve. Explain the decision making alternatives that could influence the use of the land for either crude oil production or natural forest conservation with the aid of a diagram.

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Expert Solution

The company could decide on using the plot for forest reserve.This would be done by forest management which includes economic, legal, social, scientific,technical, administrative and overall every aspects of regulation of forests . Sustainable forest management for the company includes-
1)Legal policy and institutional framework
2)extent of forest resources
3) protective functions for forests
4)socio economic functions of forests.
5) productivity from forest resources.hence the company will have earnings and also profitable if they use the land strategically for forest reserve.If the company uses the land for oil extraction there are different factors the company to undergo-
1)the land needs to be explored
2) drilling of the land under proper contact.
3)need for labour and equipment taken at lease.
4)many other expenses
5)oil level have chances of depletion.
proper waste management is equally essential for exploring of oil.also huge onsite capacity for oil storage is required.

Rahul Sunny answered 2 years ago
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