Recovery Plan for the Northern Spotted Owl - DRAFT

forestlands. The costs of production reflect technologies currently availableand the current prices of the resources used to harvest and transport timber.Under ideal market conditions, the portion of the timber inventory that isbrought into production would be the portion that yields economic rent atprevailing prices, thus contributing direct benefits to the economy. If timberprices are low, only the lower cost stands are brought into production. Iftimber prices are higher, then higher cost stands can be brought into productionas well, increasing the total rate of production and the economic rent. Thetotal economic rent realized from the timber produced is equal to the sum ofthe economic rent realized from each of the stands contributing to production.Timber consumers, such as sawmills, plywood mills, and pulpmills, alsobenefit from the production of timber. The extent of such benefits depends onthe prices at which they sell their products, the other costs they incur inprocessing wood, and the price they pay for timber.Figure H.7 shows the same supply and demand curves as Figure H.6. Thedemand curve for timber shows the prices that timber buyers would be willingto pay for timber at different rates of timber consumption. The prices millswould pay depend on wood product prices and other mill operating costs.More efficient mills with lower operating costs can pay higher prices for timberand still make profits. Less efficient mills close when timber prices are high,reducing the rate of timber consumption. The substantial profits that can bemade by most efficient mills during periods when timber prices are relativelylow are represented by the difference between the highest prices on the demandcurve and the prices set by the market when timber supplies are abundant.The hatched area in Figure H.7 represents the benefits to timber consumers,called the consumers' surplus by economists. In this case, itrepresents the sum of the profits made by mill operators at the timber price setby the market.P'Na}a)te0.0U) coS0.00)D..DQAnnual rate of productionFigure H. 7. Timnber supply curve and consumers' surplus.564