Practice Problem 3

Question 1

What is resource taxonomy

Answer 1

Classification system for categories of resource availability

Question 2

Define energy elasticity of demand

Answer 2

A measure of the %change in quantity demanded if the determinant changes by 1%

Question 3

What causes and issues are associated with energy insecurity

Answer 3

1. Energy supply hazards: supply impacted by physical, economic, and social disruption, as well as tech and enviro risk
2. Price shocks: importing countries struggle to cope when the price of oil raises
3. Demand > supply
4. Climate change, political instability, and terrorist acts

Question 4

List the indicators of energy security

Answer 4

1. Continuous availability of energy
2. Low vulnerability of vital energy systems
3. Economy is protected from energy supply disruptions
4. Four A’s achieved, resources are: available, accessible, acceptable, and affordable

Question 5

What are the implications of govt intervention in energy mkts (be able to graph)

Answer 5

Government intervention can correct market failures, enhance energy security, and promote sustainability but must be carefully designed to avoid inefficiencies, fiscal strain, and unintended social or economic consequences.

Question 6

What is the input-output model

Answer 6

Examines the interdependencies between different sectors by considering how goods and services are produced and consumed within an economy.

Question 7

How is the IO model applied in energy security and policy

Answer 7

Add the demand of one sector into the supply/demand equation of the other to calculate how much that industry needs to produce wrt the other.

Question 8

Define discount rate wrt optimal harvest time

Answer 8

The discount rate influences the timing of harvest, as future harvesting costs are discounted. Maximizes discounted net benefits.

Question 9

Define optimal harvest time

Answer 9

Calculated by dividing total wood volume by stand age

Question 10

What factors affect forestry harvesting decisions

Answer 10

1. Biological: Growth rates, MAI, CAI, and enviro conditions
2. Economic: Timber prices, discount rates, harvesting/planting costs, and net benefits
3. Policy: Ownership, gov subsidies/taxes, infinite vs single harvest planting
4. Externalities: Enviro benefits and enviro risks
5. Social: Indig, cultural significance, sustainability

Question 11

What is the decision rule wrt to the biological dimension in forestry

Answer 11

Biological dimension: Young trees grow quickly in height but slowly in volume; medium-aged trees grow faster in volume; mature trees slow down and may even lose volume. The decision rule states to harvest at a period where MAI is maximized.

Question 12

What is the decision rule wrt to the economic dimension in forestry

Answer 12

The optimal time to harvest from a profit maximization perspective would be the age that maximizes the present value of net benefits from the wood.

Question 13

What are forestry certification standards

Answer 13

All focus on sustainable forest management to maintain biodiversity, protect ecosystem health, and support local communities.

Question 14

Compare private vs public forestry mgmt

Answer 14

Private: Profit maximization, efficiency, driven by market forces, under accounted externalities, short term profit over sustainability

Public: Balance ecological goals, sustainability/public benefits, influenced by public/conservation, integrates externalities, political interference

Question 15

What causes inefficiency in forestry mgmt

Answer 15

1. Perverse incentives: bad policies that encourage deforestation or illegal logging
2. Externalities: deforestation has global impacts such as biodiversity loss and climate change

Question 16

Compare the clear cut value vs sustainable forest mgmt (calculation)

Answer 16

Cutting all trees in an area vs selective logging so young trees mature and ecological function is protected

Question 17

What are the implications associated with interest rate (interpret interest rate)

Answer 17

As a high discount rate decreases the benefits of harvest, the ideal harvest age (and volume) decrease to a point where the project is no longer viable. At a discount rate of 0, the ideal harvest time is at max timber volume and age. Increasing discount rate, decreasing harvest age and volume.

Question 18

What are the implications of poverty and debt on forest resources?

Answer 18

1. Unowned or publicly owned forests are something seen as a means of providing land to people living in poverty.
2. Poverty and deforestation can reinforce each other through positive feedback loop
3. At the national level, large debts encourage overexploitation of resources to finance the debt