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8.1 A sawmill is bidding to purchase 50,000 MBF of sugar pine located on a 1000 acre tract, 40 miles from the mill. If the mill is successful in its bid, it must construct an additional 5 miles of main haul road and 3 miles of temporary spur roads. Also, the purchaser must perform slash disposal and site preparation on 1000 acre to ready the sale area for re-planting.

Volume: 50,000 MBF (log scale, hereafter = L.S.)

Species: sugar pine

Product: kiln dried lumber, 1x4, 1x6, 1x8, 1x10, 1x12 number 2 and better common. Selling price is $415.00 per MBF lumber tally (lumber tally = L.T.)

Overrun: 11 percent

Profit ratio = 0.12, to be applied to selling price of the final product, expressed in log scale.

Milling costs: $80.00 per MBF (L.T.)

Yarding and loading: $25.00 per MBF (L.S.)

Felling and bucking: $10.00 per MBF (L.S.)

Road construction: 5 miles main haul road at $30,000 per mile; 3 miles spur road at $3000 per mile

Slash disposal/site preparation: 1000 acres at $100 per acre

Overhead (supervision/admin.): $11.00 per MBF (L.S.)

(a) What price per thousand board feet (MBF) would the mill like to offer for the stumpage?

(b) What is the absolute maximum price per MBF the mill can offer?

(c) What accounts for the difference in the two prices?

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8.2 A timberland management firm plans to manage jack pine plantations on an even-aged basis. The costs and returns data for a 40-year rotation are as follows:

Costs per acre:

Revenues per acre:

(a) If the interest rate is 5 percent, what is the most money that the company should pay per acre for bare land, assuming it will be managed as described in perpetuity?

(b) What is the land and timber value (LTV) for ages 10, 25, and 30?

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8.3 A study established the terms of trade in a barter forest economy as follows:

(a) Construct a full terms-of-trade table showing the exchange rates in terms of each output similar to table 8.21.

(b) If sawlogs sold for $100 per MBF, what is the imputed dollar value per unit of water, recreation use, and sport fishing, which are not sold in markets?

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8.4 The following survey data were collected describing all of the visitors coming to the Big Stoney Creek Recreation Area for 1 year.

(a) Derive the at-home demand curve for Big Stoney Creek visits by individuals in all zones (assuming it is the same for all zones). To do this, plot the survey data on graph paper to fit a nonlinear curve of total cost and visit rates. Then interpolate the needed data for the at-home demand curve. Check this part of the answers before proceeding. You may have slightly different numbers. This is OK, but use the data in the answer to this part for the rest of the questions.

(b) Estimate the at-gate demand curve for individuals from zone 3 for different gate fees.

(c) Calculate and plot the aggregate at-gate demand curve at different gate fees.

(d) What are the estimated total willingness to pay, average willingness to pay, and consumer surplus for a gate fee of $15.