iii) Due to enforced law and monitoring against illegal harvesting, the producers drops harvest which shifts supply curve to S1. No change in the desirability leads to no shift in demand and it remains constant at previous level. As a result equilibrium quantity falls to Q1 and price rises to P1.
iii) If illegal market now falls under government monitoring subject to strictly enforced laws then the producer won’t be able to supply at previous cost. Either the cost level would go higher creating disincentive to supply or the production would be restricted by the govt. itself. In such case the operating cost difference in the legal and illegal market would vanish and both the market would face same kind of restrictions and conditions imposed with regards to supply.
b)-i) Since a small elite group controls the market of mahogany locally it appears that the market structure is oligopolistic in nature where few seller are existent in the market. On the other hand export market is largely taken care of by two powerful players that indicate presence of duopoly market structure.
ii)-1) Since these two are only producers in the market, instead of supplying separately they enter into a collusion that help them set price and quantity set at level higher than the market equilibrium level. This increases the industry profit and pushes to maximized level. Without collusion firms had to share different level or profits with higher share of profit snatched by the leader compared to the follower in the duopolistic market.But collusion helps them share the profit equally and higher profit stems from higher market price than equilibrium while quantity supplied might be lower than equilibrium amount.
2) Duopolists collude in order to lower the market supply and increase the price level unnecessarily high so that they can derive chunk of the profit. This implies lower deforestation which is beneficial for the health of mahogany population.
3) Yes the collusion strategy if maintained for long time can lead to much lowered deforestation of mahogany trees. Since the colluders charge much higher price for low level of quantity supplied, the pressure on supply falls and overtime higher prices of harvest would create disincentives for the consumers. As a result in the long run the harvest would fall and that would be sustainable to the Brazilian ecology maintaining the balance.
b)
Period (1) |
Areas with mahogany (2) |
Areas without mahogany (3) |
Homicide rate difference between municipalities (4) |
Pre-1999. Pre major government intervention |
12.41835 |
6.154223 |
6.264131 |
1999 to 2001. 85% of licenses revoked |
19.43157 |
5.009476 |
14.4221 |
2001-2008. Harvesting banned |
34.16096 |
10.02253 |
24.13843 |
Post-2008. The law is enforced |
44.84869 |
21.26008 |
23.58861 |
Table 1: Comparison of average homicide rates, municipalities with and without mahogany, different periods
Lessons and Reflections
b)-i) If random harvesting is not regulated then the incentivized producer will follow the self interest and keeps on producing or supplying to quench own benefit and profit motives. When self interest can’s take care of the social welfare as whole by leading the allocation toward inefficiency, market failure appears in the context.Production than the social desirable level would create inefficient and adverse social impacts. The most dangerous impact being the loss of ecological balance, species surviving in such forests and so on.
ii)
References
Barbosa, L.C., 2015. Guardians of the Brazilian Amazon rainforest: Environmental organizations and development. Routledge.
Canto, V.A., Joines, D.H. and Laffer, A.B., 2014. Foundations of supply-side economics: Theory and evidence. Academic Press.
Copeland, B.R. and Taylor, M.S., 2013. Trade and the environment: Theory and evidence. Princeton University Press.
Feenstra, R.C., 2015. Advanced international trade: theory and evidence. Princeton university press.
Free, C.M., Landis, R.M., Grogan, J., Schulze, M.D., Lentini, M. and Dünisch, O., 2014. Management implications of long-term tree growth and mortality rates: A modeling study of big-leaf mahogany (Swietenia macrophylla) in the Brazilian Amazon. Forest ecology and management, 330, pp.46-54.
Gandolfo, G., 2013. International trade theory and policy. Springer Science & Business Media.
Grogan, J., Schulze, M., Lentini, M., Zweede, J., Landis, M. and Christopher, M., 2013. Managing big-leaf mahogany in natural forests. Tropical Forest Update, 22(1), pp.12-15.
Hyman, D.N., 2014. Public finance: A contemporary application of theory to policy. Cengage Learning.
Nicholson, W. and Snyder, C., 2014. Microeconomic theory.
Reboredo, F., 2013. Socio-economic, environmental, and governance impacts of illegal logging. Environment Systems and Decisions, 33(2), pp.295-304.
Rios, M.C., McConnell, C.R. and Brue, S.L., 2013. Economics: Principles, problems, and policies. McGraw-Hill
Rubinstein, A., 2012. Lecture notes in microeconomic theory: the economic agent. Princeton University Press.
Saunders, J. and Reeve, R., 2014. The EU timber regulation and CITES (No. Energy, Environment and Resources PP EER no. 2014/08, p. 30p). Chatham House, London, UK.
Seydack, A.H., 2012. Regulation of timber yield sustainability for tropical and subtropical moist forests: Ecosilvicultural paradigms and economic constraints. In Continuous Cover Forestry (pp. 129-165). Springer Netherlands.
Tacconi, L., 2012. Illegal logging: law enforcement, livelihoods and the timber trade. Earthscan.
Zimmerman, B.L. and Kormos, C.F., 2012. Prospects for sustainable logging in tropical forests. BioScience, 62(5), pp.479-487.
We provide professional writing services to help you score straight A’s by submitting custom written assignments that mirror your guidelines.
Get result-oriented writing and never worry about grades anymore. We follow the highest quality standards to make sure that you get perfect assignments.
Our writers have experience in dealing with papers of every educational level. You can surely rely on the expertise of our qualified professionals.
Your deadline is our threshold for success and we take it very seriously. We make sure you receive your papers before your predefined time.
Someone from our customer support team is always here to respond to your questions. So, hit us up if you have got any ambiguity or concern.
Sit back and relax while we help you out with writing your papers. We have an ultimate policy for keeping your personal and order-related details a secret.
We assure you that your document will be thoroughly checked for plagiarism and grammatical errors as we use highly authentic and licit sources.
Still reluctant about placing an order? Our 100% Moneyback Guarantee backs you up on rare occasions where you aren’t satisfied with the writing.
You don’t have to wait for an update for hours; you can track the progress of your order any time you want. We share the status after each step.
Although you can leverage our expertise for any writing task, we have a knack for creating flawless papers for the following document types.
Although you can leverage our expertise for any writing task, we have a knack for creating flawless papers for the following document types.
From brainstorming your paper's outline to perfecting its grammar, we perform every step carefully to make your paper worthy of A grade.
Hire your preferred writer anytime. Simply specify if you want your preferred expert to write your paper and we’ll make that happen.
Get an elaborate and authentic grammar check report with your work to have the grammar goodness sealed in your document.
You can purchase this feature if you want our writers to sum up your paper in the form of a concise and well-articulated summary.
You don’t have to worry about plagiarism anymore. Get a plagiarism report to certify the uniqueness of your work.
Join us for the best experience while seeking writing assistance in your college life. A good grade is all you need to boost up your academic excellence and we are all about it.
We create perfect papers according to the guidelines.
We seamlessly edit out errors from your papers.
We thoroughly read your final draft to identify errors.
Work with ultimate peace of mind because we ensure that your academic work is our responsibility and your grades are a top concern for us!
Dedication. Quality. Commitment. Punctuality
Here is what we have achieved so far. These numbers are evidence that we go the extra mile to make your college journey successful.
We have the most intuitive and minimalistic process so that you can easily place an order. Just follow a few steps to unlock success.
We understand your guidelines first before delivering any writing service. You can discuss your writing needs and we will have them evaluated by our dedicated team.
We write your papers in a standardized way. We complete your work in such a way that it turns out to be a perfect description of your guidelines.
We promise you excellent grades and academic excellence that you always longed for. Our writers stay in touch with you via email.