Uni-Go Company makes motorized unicycles. Uni-Go is deciding whether to include a safety feature that would cost $6 for each unicycle. Uni-Go estimates the probability of death without the safety feature is 1/90,000 and the death cost per unicycle is $5.55. If Uni-Go has underestimated the probability of death and the true probability of death is 1/80,000, then the true cost-benefit recommendation would be for Uni-Go to
A) add the safety device.
B) add the safety device and all other safety devices available.
C) not add the safety device.
D) not add the safety device nor any other safety devices.

Question

Quizplus · Accepted Answer

The true cost of death per unicycle with the underestimated probability is calculated as $5.55, which is derived from the original estimate of 1/90,000. If the true probability of death is 1/80,000, the cost of death per unicycle would be higher, making the $6 cost for the safety feature a worthwhile investment to potentially save lives and reduce overall costs associated with deaths. Therefore, adding the safety device is the recommended action.

Uni-Go Company Makes Motorized Unicycles