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ENR721S - ENVIRONMENTAL AND NATURAL RESOURCE ECONOMICS - 2ND OPP- JAN 2023 |
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r
n Am I BI A u n IVE RS ITY
OF SCIEn CE TECHn OLOGY
FACULTY OF HEALTH, NATURAL RESOURCESAND APPLIED SCIENCES
DEPARTMENT OF AGRICULTUREAND NATURALRESOURCESSCIENCES
QUALIFICATION: BACHELOROF SCIENCEIN AGRICULTURE
QUALIFICATION CODE: 07BAGA
COURSECODE: ENR721
LEVEL: 7
COURSENAME: ENVIRONMENTAL AND
NATURAL RESOURCEECONOMICS
DATE:JANUARY 2023
DURATION: 3 HOURS
MARKS: 100
SECOND OPPORTUNITY EXAMINATION QUESTION PAPER
EXAMINER(S)
M LUBINDA
MODERATOR:
S KALUNDU
INSTRUCTIONS
1. Answer ALL the questions.
2. Write clearly and neatly.
3. Number the answers clearly.
PERMISSIBLE MATERIALS
1. Examination question paper
2. Answering book
3. Calculator
THIS QUESTION PAPERCONSISTSOF 4 PAGES(Excluding this front page)
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QUESTION ONE
a. With the aid of a diagram, describe the Material Balance Model.
[MARKS]
(6)
b. Explain the three main objectives of environmental management from a policy
perspective.
(6)
c. Suppose the market for organically grown maize is modelled through the following
market supply and demand functions:
P = 25 - 0.025Q
P = 10 + 0.00SQ
Where P is the price per kilogram and Q is quantity in thousands of kilograms.
i.
Estimate the minimum selling price, choke price, equilibrium quantity, and
equilibrium price.
(4)
ii.
Suppose the government wants to introduce a policy that supports the
production of organic maize. This policy introduces a mandatory price of
N$15 per kilogram. Estimate the welfare effects of the policy. (Hint:
(9)
estimate the total surplus before and after the introduction of the policy.)
Total marks
[25]
Second Opportunity Examination
Page 2 of5
January 2023
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QUESTION TWO
a. Explain the difference between a public good and a private good.
[MARKS]
(4)
b. Explain why environmental standards are not usually set at an allocative efficient level.
(4)
c. Suppose a lather manufacturing company is releasing pollution into a nearby rangeland,
and the associated health and ecological damages are not considered in the private
market. Suppose you are working for the Department of Environmental Affairs, and you
are provided with the following marginal benefits and costs.
MPB = 80 - 0.SQ
MPC = 10 + 0.SQ
MEC = 0.4Q
Where Q is the quantity in thousands of kilograms of lather and P is the price per
kilogram of lather.
i. Estimate the quantity and price when the market is in competitive equilibrium.
(3)
ii. Estimate the quantity and price when the market is in efficient equilibrium
(5)
iii. Suppose a community owned the right to the rangeland, and it is negotiating
with the lather company that is willing to pay the community to produce more
output. For the 40th unit of output, determine range within which a payment
(9)
would be acceptable to both parties.
TOTAL MARKS
[25)
Second Oppo11unityExamination
Page 3 of5
January 2023
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QUESTION THREE
a. Compare and contrast the command-and-control
environmental management.
and market approach to
[MARKS]
(6)
b. Suppose the City of Windhoek is attempting to set a water quality standard, where
water quality is measured in percent of heavy metals abated (A), and the marginal
social benefit (MSB) and marginal social cost (MSC) of abatement have been estimated
as follows:
(6)
= MSB 40 - 0.2A
MSC= 0.9A
The Department of Environment Affairs sets the standard at 10 percent. Is this
standard set efficiently, too stringently, or too leniently? Explain your answer.
c. Suppose there are two power plants that are releasing sulphur dioxide into the air that
exceeds the emission standard. To meet the standard, 60 units of sulphur dioxide must
be abated in total. The two plants face the following abatement costs:
= MAC2 0.9A 2
Where costs are measured in thousands of Namibian dollars.
i. Prove that a uniform standard will not meet the cost-effectiveness criterion.
Explain your answer.
(6)
ii. Determine how the abatement levels should be reallocated across the two
plants to minimize costs.
(7)
TOTAL MARKS
[25]
Second Oppo11unityExamination
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January 2023
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QUESTION FOUR
a. Explain the instruments that are used under the market approach to manage the
environment.
[MARKS]
(8)
b. Suppose the Department of Environmental Affairs (DEA) seeks to introduce a voluntary
emissions trading program, which allows polluters to achieve cost-effective solutions
when meeting clean air requirements in the Environmental Management Act. Suppose
that the DEA's objective for two major polluters is a 70 percent reduction in carbon
monoxide emissions. Suppose further that the two firms face the following costs:
Firm 1: TAC1 = 1000 + 2Af
Firm 2: TAC2 = 500 + SA~
= MAC2 10A 2
Where A1 and A2 represents the percentage of carbon monoxide abatement achieved
by firm 1 and firm 2, respectively, and TAC and MAC are measured in thousands of
Namibian dollars.
i. Calculate the TAC and MAC for each firm if a uniform abatement standard were
used.
(5)
ii. Is there an economic incentive for the firms to participate in the trading program.
Explain your answer.
(2)
iii. Quantify the cost savings associated with cost-effective abatement allocation that
could be achieved through trading.
(6)
iv. At what price must each tradable permit be set to achieve the cost-effective
solution.
(4)
TOTAL MARKS
[25)
THE END
Second Opportunity Examination
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January 2023