Question

In: Economics

Discuss two reasons why the optimal rotation interval achieved through a private market may differ significantly...

  1. Discuss two reasons why the optimal rotation interval achieved through a private market may differ significantly from the socially optimal rotation

Solutions

Expert Solution

The optimal rotation interval achieved through private market may differ significantly from socially optimum rotation for some reasons.

First, shorter rotation ages will results because social discount rate is lower than the private discount rate.

Second, incorrect rotation ages may obtained due to incorrect prices.Incorrect prices are the result of imperfect market.


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