AREC 3004 Water&Bio-Resource Economics

 Sample Final Exam 

I. Answer the following questions briefly (give just direct answers and be brief): 

6 points each) 1. Briefly comment on the importance of determining the optimal path to the optimal steady 

state in a fishery. Comment on the method to derive this optimal path that was used in one of the tutorials. 

2. What are the three dominant doctrines of water rights? Briefly describe each of them 3. Briefly interpret the 

Hartman-Faustman criterion for forestry management. 4. Briefly discuss the main characteristics of the Australian

 water market over the last 10 years 5. State three key policies in water management and governance in Australia

 and briefly (one-two sentence each) discuss their key properties. 6. Discuss the open-access problem by comparing 

and contrasting fisheries and groundwater resources, II. Discuss the Australian system of water rights (i.e. entitlements and allocations) and compare and contrast them with the property rights in fisheries in the form of ITQs and TAC. (13 points) III. Problem based question (18 points) Consider the following water quality problem: There is currently a low water quality in river, because the readings of dissolved oxygen are consistently around 3 mg/litter. An action to reduce loading of waste water is proposed that can improve water quality to readings of 5 mg/litter DO. However, the effect of the action is not completely certain, and it is expected that it can achieve the planned improvement with probability of 85%. The estimated benefit from the improvement in water quality is $20 million. However, the cost of the action to reduce loading of wastewater is $17.5 mill. Should this action be taken given this information? Also, there is a possibility to commission a study that will increase the certainty of the expected achievement of the planned improvement to 95%. The study will cost $ 0.5 mill. Should the study be commissioned? 2 IV. Extended response question (13 points) Discuss the importance of eliminating the joint land and water right ownership. Provide discussion on the implications of the unbundling of this joint right for the water markets. V. Eight multiple choice questions (3 points each). (Total of 24 points). Circle the correct answer for the posed question. 1. Even aged forests are: i). Ancient forests that grow at an even age biological growth function ii). Natural forests that have been growing over long period of time iii). Forests that do not need thinning iv). Plantation forests v). Forests with an even balance of timber and non-timber products over their age 2. Current annual increment is: i). Total growth of a forest over time ii). Average growth of a forest over time iii). Median growth of a forest over time iv). Mean growth of the forest over time v). Marginal growth of the forest over time 3. Deforestation is: i). The process of clear-cutting native forest ii). The process of planting forest anywere in the world iii). The process of planting forests in areas that were previously not forested iv). The process of planting forests in areas that were previously forested v). The process of slowly reducing the forest cover 4. Head tax is: i). tax on harvest ii). tax on gear iii). tax on effort iv). tax on labor in a fishery v). tax on income from a fishery 5. CEWH stands for: i) Common Economic Water Holding ii) Commonwealth Environmental Water Holder iii) Commonwealth Equality Watering Hole iv) Commonwealth Environmental Watch House v) Commonwealth Entitlement Water Hoarding 3 6. Prices of water entitlements should theoretically be: i) Equal to the capitalized value of the price of allocations. ii) Equal to the price of allocations at least most of the time. iii) Equal to the long term water yield. iv) Equal to market value of water in high-value crops. v) Equal to market value of water in high-security crops. 7. When water prices are high: i) 

An irrigator will invest in an efficient irrigation system to reduce application losses ii) An irrigator will invest in an 

efficient irrigation system to reduce seepage losses iii) An irrigator will not invest in an efficient irrigation system iv) An irrigator will 

invest in an efficient irrigation system only if price of the crop is also high v) An irrigator will invest in an efficient irrigation system

 only if it subsidised 8. One way to solve the problem of groundwater quantity and quality is to: i) Provide a subsidy to reduce

 the cost of pumping ii) Impose a charge on the quantity of groundwater pumping iii) Impose a limit on the allowed deep-drainage iv) 

Encourage planting of perennial crops rather than annual crops v) Ensure that the pumping wells are build at sufficient depth