Question

Brian, Edison, and Kevin are lumberjacks who live next to a forest that is open to logging; in other words, anyone is free to use the forest for logging. Assume that these men are the only three lumberjacks who log in this forest and that the forest is large enough for all three lumberjacks to log intensively at the same time.

Each year, the lumberjacks choose independently how many acres of trees to cut down; specifically, they choose whether to log intensively (that is, to clear-cut a section of the forest, which hurts the sustainability of the forest if enough people do it) or to log nonintensively (which does not hurt the sustainability of the forest). None of them has the ability to control how much the others log, and each lumberjack cares only about his own profitability and not about the state of the forest.

Assume that as long as no more than one lumberjack logs intensively, there are enough trees to regrow the forest. However, if two or more log intensively, the forest will become useless in the future. Of course, logging intensively earns a lumberjack more money and greater profit because he can sell more trees.

The forest is an example of a_________ (A club good, A private good, A public good, A common resource).

Because the trees in the forest are________ (Excludabel, Nonexcludable) And ________ (Rival in consumption, Nonrival in consumption).

Depending on whether Edison and Kevin both choose to log either nonintensively or intensively, fill in Brian's profit-maximizing response in the following table, given Edison and Kevin's actions.

                          Edison’s and Kevin’s Actions

                                  Log nonintensively                      Log Intensively

Brian’s Profit Maximizing Response (Log intensively or Log nonintensively (Intesnively or Nonintensively)

Which of the following solutions could ensure that the forest is sustainable in the long run, assuming that the regulation is enforceable? Check all that apply.

1. Outlaw intensive logging.

2. Develop a program that entices more lumberjacks to move to the area.

3. Convert the forest to private property and allow the owner to sell logging rights.

Please explain things in the correct order so that it is easy to understand.

Answer 1

ANSWER 1 :-

1. The forest is an example of a common resource. (A common resource which includes the forest land is not owned by anyone although it can deteriorate if is being overused or over harvested. This indicates that a common resource is rivalrous and thus can get excessively reduced by time.) So, option 'D' is the most appropriate answer.
2. Club goods are the ones which basically remain functioning even after they are used. These are thus non-rivalrous or not ending instantly after use and can be used spontaneously (continuously). Example include Television set. So, option 'A' is not appropriate.
3. Pyruvate goods are the ones which carry a market value at which it is sold. The one who purchased the good becomes the prior owner of the goods unless it is being sold although in this case there is no purchase or sale of the forest area and hence option 'B' is not appropriate.
4. Public goods are the ones owned by the public and the goods do not disintegrate. Utilisation of the goods by one individual does not restricts others from using them and hence are common and equally distributed to all whereas in this case the forest is open for logging but is rivalrous. Public goods tends to be non-rivalrous (non degrading). So, option 'C' is not appropriate.
5. Option 'D' is the most appropriate answer.

ANSWER 2 :-

1. Excludable means restricting another person from using an owned good. A forest cannot be considered as excludable.
2. The trees and the forest area can be visited by any person although due to the logging activity, the forest can show reduction in tree sustainance and results into conversion of forest into a barren patch. So, option 'B' which is non-excludable is the most appropriate answer.

ANSWER 3 :-

1. The forest becomes a natural resource which can be used and cannot be resued again. In other words, once a product obtained from forest such as fruit is used / consumed, the fruit can grow again but cannot be reused. Once a patch of forest area is removed, it becomes very difficult to replenish the area and hence it should be considered as rivalrous. A forest is thus rival in consumption and hence option 'A' is the most appropriate answer.

Note :- Respected Sir, the third question doesn't seem to be correctly phrased or mentioned. Please reupload it once again to be answered. For any doubts please prefer communicating through comment section and please provide an upvote if the answer seems satisfactory.