Test questions: Water economics

1. Safe drinking water and sanitation are particularly economic goods. (True or false?)

 

2. In many countries consumers pay enough for water services. (True or false?)

 

3. What is the “free water dilemma”? And what are the consequences?

 

4. Why do we need the economics of water pricing? Name at least three points.

  

5. There are several general principles involved in assessing the economic value of water and the costs associated with its provision. What does the ideal sustainable use of water require?

 

6. What is the difference between the Full Supply Cost, the Full Economic Cost and the Full Cost of water?

 

7. What are the four columns of the Economic Value of water and what do they comprise?

 

8. The Full Value of water is the sum of Economic Value and Intrinsic Value. What are Intrinsic Values and what is the problem with these Values?

 

9. The classical economic model indicates that social welfare is maximized when the value of water, which we estimate from the Value in Use is equal to the Full Cost of water. In many cases the Value in Use may be lower than Full Cost, Full Economic Cost, and even below Full Supply Cost. Why?

 

10. Name at least five types of economic instruments.

 

11. Economic instruments normally work best in combination with what and why?

 

12. What is the difference between tariffs and charges?

 

13. The following graphic is illustrating different types of water tariffs. Which types of tariffs are illustrated by the different colors?

 

 

14. In the following graphic three different tariffs types are illustrated showing the price per cubic meter.

a) Which types of tariffs are illustrated?

b) If the average supply cost would be 18 €/household, how much water needs to be consumed by a household to cover these costs when comparing the three tariffs?

c) How much water would a household get for 30 € comparing the three tariffs?

d) Under which tariff would a household get the least amount of water for 18 € and under which tariff would a household get the most amount of water for 30 €?

 

15. A small town in a developing country has a well-functioning water supply system where all houses are connected to the piped water supply system – even the poorest neighborhoods. An average household (7 persons) consumes 8.4 m³ of water per month. The town has a two part tariff system (a fixed charge per connection per month of 2 € and a price of 0.4 €/m³) for all domestic households in the entire town.

a) What is the daily average per capita water consumption in this town?

b) How much is the average monthly bill of an average household?

c) If the average monthly bill is not affordable for the households in the poor neighborhoods how could alternative tariffs be designed for these households and how much less would they have to pay?

d) What would happen with the water consumption pattern in these neighborhoods, if your proposed tariff system would be introduced?

 

16. What is the difference between abstraction charges and pollution charge?

 

17. What are tradable permits?

 

18. What are the application field of tradable permits?

 

19. What are subsidies (also known as a subvention) and give least two examples of how they can be used in the water and sanitation sector.

 

20. What is the main problem with subsidies and why are they so controversial?

 

21. Name at least two advantages and disadvantages of subsidies.

 

22. How can economic instruments provide incentives to improve sustainable water and sanitation services and to use water resources more efficiently? Name at least three examples.

 

23. Pricing water is a very controversial topic and there is plenty of disagreement about the “right” way of pricing it. What are the most discussed problems? Name at least four.