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Environmental Economics Question Paper

Environmental Economics

Course:Bachelor Of Science In Economics And Mathematics

Institution: Kabarak University question papers

Exam Year:2008

INSTRUCTIONS:
1. Answer question ONE and any other TWO questions.

1. Distinguish between the following paired terms as used in environmental economics:
a) Externality cost and externality benefit (4 marks)
b) Marginal benefit and marginal net benefit (4 marks)
c) Resource function and amenity function (4 marks)
d) Social cost and private cost (4 marks)
e) Actual value and existence value (4 marks)
2. a) What is meant by sustainable development (2 marks)
b) Using Kuznets Curve, discuss the expected relationship between economic
growth and environmental quality. (5 marks)
c) Explain four ways a country can ensure sustainable development
(18 marks)
3. A firm engaged in the production of batteries is faced with the following demand and
supply functions.
Pd = 150- 0.0025Q and Ps
= 50 + 0.0025 Q
The pollution costs per unit resulting from its production is C = 0.001 Q
a) By use of a graph distinguish the social optimum allocation from the market
equilibrium (9 marks)
b) Using algebra, solve for the output and price at market equilibrium and the
social optimum allocation. (5 marks)
c) What amount of tax rate will be necessary to enable an achievement of the
social optimum? (2 marks)
d) Discuss three ways in which the government can intervene in the market to
control pollution. (9 marks)
4. Suppose the demand an supply functions of Titanium (being an exhaustible resource) is
given as
Pd = 2000- 0.01Q and Ps
= 400 + 0.015Q
Where the price is in US$ and quantities are in metric tons.
Assume that the total stock available of Titanium for period I and period II generation
is 10,000 tons.
a) Suppose allocation was to be left to the invisible hand, show through computation the
problem that will face the period II generation? (6 marks)
b) Assuming a discount rate of 7.5% and that one period (one generation) spans 10 years,
solve for inter-temporal optimum allocation using a graph. (6 marks)
c) Compute algebraically for the optimum allocation (8 marks)
d) From the graph show the gains that result from the inter-temporal optimum allocation.
(5 marks)
5. a) Using a diagram, distinguish between maximum sustainable yield, profit maximizing
solution, open access solution and common property solution in the management of a
renewable resource. (10 marks)
b) Discuss three biases of contingency valuation method a researcher need to be aware of.
(6 marks)
c) Discuss the demerits and merits of cost-benefit analysis. (9marks)

Environmental Economics Question Paper

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