a) Briefly describe the relationship between economic system and the environment using both the first and second laws of thermodynamics (6 marks)
b) Explain the difference between the following terms
i) Positive and normative economics (3 marks)
ii) Consumer and producer surplus (3 marks)
iii) State and common property regimes (3 marks)
c) State the key characteristics of efficient property rights structures. (3 marks)
d) Describe externalities as a source of market failure with the aid of a clearly labeled diagram. (7 marks)
a) State the coase theorem as used in pursuit of efficiency (5 marks)
b) Describe with the aid of a labeled diagram. How government failure can lead to environmental problems (10 marks)
a) Explain the efficient allocation of environmental resources using Pareto optimality. (3 marks)
b) Describe the key benefits valuation challenges in cost- benefit analysis (6 marks)
c) Discuss the key cost estimation approaches in cost benefit analysis (6 marks)
a) Explain the importance of valuing the environment in Kenya. (5 marks)
b) Describe the main economic methods used for measuring environmental values. (10 marks)
a) Hedonic wage studies indicate a willingness to pay $80 per person for a reduction in the risk of a premature death from water pollution of1/100000 in Nairobi County. If the exposed population is five million people, what is the implied value of a statistical life? (7 marks)
b) Assuming that in implementing environmental regulation to control water pollution is expected to reduce the risk of premature death from 7/100000 to 3/100000 per year in the exposed population of five million people. What would be the maximum amount this regulation would cost and still have the benefits which are at least as large as the costs. (7 marks)
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