State Forest Service Forest Economics & Valuation: practice questions

1 · Economic characteristics of forestry: long production periods, joint products · easy

Which feature most distinguishes forestry from most other enterprises?

1. A very short production period of under one year
2. No need for capital of any kind
3. A very long production period
4. Products that are always sold in perfect markets

2 · Time value of money in forestry: compounding and discounting · easy

What is the present value of 5000 received in 30 years, discounted at 5%?

1. 21609.71
2. 2000.00
3. 1156.89
4. 4761.90

3 · Net present value, internal rate of return and benefit-cost ratio · easy

Planting costs 1000 now and yields a single revenue of 3000 in 20 years. What is the NPV at 6%?

1. -64.59
2. 2000.00
3. 935.41
4. -207.14

4 · Forest valuation and stumpage appraisal · easy

Logs sell for 80 per m³ delivered to the mill. Logging costs 20, haulage 15, and the buyer's profit and risk allowance is 10% of the delivered price. What is the stumpage by the residual method?

1. 45 per m³
2. 80 per m³
3. 37 per m³
4. 29 per m³

5 · Forest valuation and stumpage appraisal · medium

When enough buyers compete, the usual way public forest agencies discover stumpage is:

1. Competitive bidding by auction or sealed tender
2. Fixing a single national price each decade
3. Letting the first buyer who arrives name any price he wishes
4. Valuing timber at the cost of planting it

6 · Timber markets, prices and trade · easy

The demand for timber is described as derived because it depends on:

1. The amount of timber growing in forests
2. Demand for the products made from it
3. The number of foresters employed
4. Rainfall in timber-producing regions

7 · Valuation of non-market goods and ecosystem services · easy

The value people place on knowing that a rare forest species exists, even if they never see it, is:

1. Existence value
2. Direct use value
3. Indirect use value
4. Option value

8 · Cost-benefit analysis of forestry and agroforestry projects · medium

Economic cost-benefit analysis differs from financial analysis mainly in that it:

1. Uses only market prices and the owner's actual cash flows each year
2. Excludes all costs that occur after the first year
3. Ignores benefits that are received in cash
4. Uses society's perspective, shadow prices and externalities

9 · Payments for ecosystem services · easy

Payments for ecosystem services are best described as:

1. Fines paid by loggers who break forest laws in protected areas
2. Taxes on timber imports collected at ports
3. Voluntary payments from beneficiaries to land managers, conditional on the service
4. Salaries paid to forest guards by the state

10 · Payments for ecosystem services · medium

REDD+ is a mechanism to:

1. Regulate exports of dried and processed timber products
2. Restore degraded farmland by planting only exotic species
3. Record the daily rainfall at forest research stations
4. Reducing emissions from deforestation and degradation, plus stock enhancement