Question 1

Highway engineers have proposed improving a dangerous stretch of highway at a cost of $3 million.They expect that it will reduce the risk of someone dying in an accident from 22.1 percent to 7.1 percent over the life of the highway.What is the value of a human life whereby the project would be worth doing
A)at least $450,000
B)at least $9.05 million
C)at least $10 million
D)at least $12.2 million

Accepted Answer

The value of a human life is the amount of money that people are willing to pay to reduce the risk of death. In this case, the highway engineers are proposing a project that will reduce the risk of death from 22.1 percent to 7.1 percent. The cost of the project is $3 million. So, the value of a human life is at least $3 million / (22.1% - 7.1%) = $450,000.

Question 2

For use in cost-benefit analysis,how is the value of a human life sometimes calculated
A)on the basis of the risks that a person voluntarily exposes herself to in her job and in her daily activities
B)on the basis of the value of each individual's assets
C)on the basis of an infinite value for each life
D)on the basis of the amount of resources required to adequately sustain life

Accepted Answer

The value of a human life in cost-benefit analysis is often calculated based on the risks individuals voluntarily take, such as in their jobs, which reflects their implicit valuation of life through wage-risk trade-offs.

Question 3

Suppose that policymakers are doing cost-benefit analysis on a proposal to add traffic barriers to divide the flow of traffic in an effort to increase safety on a given highway.How can policymakers evaluate the costs and benefits of this proposal
A)The costs cannot be measured in the same units as the benefits.
B)Policymakers need to calculate the flow of the traffic.
C)Quantification of the benefit received from saving a human life is a straightforward process.
D)Policymakers must put a dollar value on human life.

Accepted Answer

To effectively evaluate the costs and benefits of adding traffic barriers, policymakers must put a dollar value on human life. This is because the benefits of saving a life cannot be quantified in the same units as the costs of implementing the policy. By putting a dollar value on human life, policymakers can weigh the costs of adding traffic barriers against the potential benefits of reducing fatalities and serious injuries on the highway. This allows for a more comprehensive cost-benefit analysis of the proposal.

Question 4

When an infinite value is placed on human life,what will policymakers who rely on cost-benefit analysis likely do
A)They will be forced to pursue any project in which a single human life is saved.
B)They are likely to make decisions that optimally allocate society's scarce resources.
C)They will likely not pursue any public project that would not save human life.
D)They will be forced to rely on private markets to provide the project.

Accepted Answer

If an infinite value is placed on human life, any project that saves even a single life would outweigh any cost, forcing policymakers to pursue it regardless of other considerations.

Question 5

To increase safety at a bad intersection,you must decide whether to install a traffic light in your home town at a cost of $20,000.If the traffic light reduces the risk of fatality by 0.5 percent and the value of a human life is about $10 million,what should you do
A)You should install the light because the expected benefit of $50,000 is greater than the cost.
B)You should install the light because the expected benefit of $30,000 is greater than the cost.
C)You should not install the light because the expected benefit of $20,000 is only equal to the cost.
D)You should not install the light because the expected benefit of $5000 is less than the cost.

Accepted Answer

The expected benefit can be calculated as:
Probability of a fatality without traffic light = 1%
Probability of a fatality with traffic light = 0.5%
Expected benefit = (probability of fatality without traffic light - probability of fatality with traffic light) x the value of a human life
Expected benefit = (0.01 - 0.005) x $10 million = $50,000
Since the expected benefit of installing the traffic light is greater than the cost of $20,000, it is the best choice to increase safety at the intersection.

Question 6

When the value of a human life is calculated according to the economic contribution a person makes to society (as reflected in their income-earning potential),what is the most reasonable conclusion to draw
A)It is possible for a retired or disabled person to have no value to society.
B)Construction workers in high-rise buildings are more valuable than average office workers.
C)Retired people who volunteer in their communities are more valuable than physicians.
D)All workers have equal value.

Accepted Answer

Calculating the value of a human life based solely on their income-earning potential means that the value of a retired or disabled person would be considered lower since they are not able to contribute monetarily to society. This is not an ethical or humane way to determine the worth of a human life.

Question 7

Suppose that the cost of installing an overhead pedestrian walkway in a college town is $50,000.If the walkway is expected to reduce the risk of fatality by 0.5 percent and the cost of a human life is estimated at $5 million,what would the town do
A)The town would install the walkway because the estimated benefit is twice the cost.
B)The town would install the walkway because the estimated benefit equals the cost.
C)The town would not install the walkway since the cost is twice the estimated benefit.
D)The town would install the walkway since the cost of even a single life is too great.

Accepted Answer

The answer of Suppose that the cost of installing an...

Question 8

Studies have determined that 100 workers are exposed to a hazardous chemical used in the production of diet soft drinks.The cost of imposing a regulation that would ban this chemical is $5 million.Each person saved by this regulation has a value equal to $5 million.If benefits are exactly equal to costs,what probability is used to assess the likelihood of a fatality from exposure to this chemical
A)0.001
B)0.01
C)0.1
D)1.0

Accepted Answer

If the benefits are equal to the costs, then the expected number of fatalities prevented must equal the cost divided by the value per life saved. Here, $5 million / $5 million per life = 1 life. With 100 workers, the probability of a fatality is 1/100 = 0.01.

Question 9

Once a common resource is available for consumption,what do policymakers need to be concerned with
A)making sure everyone gets a fair chance to consume
B)how much is consumed
C)creating laws that will completely forbid consumption in order to preserve the environment
D)creating positive externalities from consuming the common resource

Accepted Answer

Policymakers need to be concerned with how much of the common resource is being consumed to prevent depletion or overuse. They may need to implement regulations or quotas to ensure that consumption is sustainable. While fair access to the resource is important, it is not the only concern. Outright bans on consumption may also not be necessary or effective in preserving the environment. While positive externalities from consumption can be beneficial, they are not the primary concern when managing a common resource.

Question 10

Suppose that installing an overhead pedestrian walkway would cost a college town $50,000.If the walkway is expected to reduce the risk of fatality by 2 percent and the cost of a human life was estimated at $5 million,what would the town do
A)The town would install the walkway because the estimated benefit is twice the cost.
B)The town would install the walkway because the estimated benefit equals the cost.
C)The town would not install the walkway since the cost is twice the estimated benefit.
D)The town would install the walkway since the cost of even a single life is too great.

Accepted Answer

The cost of installing the walkway is $50,000. The expected benefit of installing the walkway is a 2% reduction in the risk of fatality. The value of that benefit can be calculated as follows:

Value of Benefit = (2% x $5,000,000) = $100,000

Because the value of the benefit ($100,000) is twice the cost of installation ($50,000), the town would be making a wise investment by installing the pedestrian walkway. Therefore, choice A is the best option.

Question 11

When does the Tragedy of the Commons result
A)when a good is rival in consumption and not excludable
B)when a good is excludable and not rival in consumption
C)when a good is both rival in consumption and excludable
D)when a good is neither rival in consumption nor excludable

Accepted Answer

The Tragedy of the Commons occurs when a resource is rival in consumption (one person's use diminishes others' ability to use it) and not excludable (people cannot be prevented from using it), leading to overuse and depletion.

Question 12

A town engineer comes to the town council with a proposal to build a traffic light at a certain intersection that currently has a stop sign.The benefit of the traffic light is increased safety: it will reduce the incidence of fatal traffic accidents by 50 percent per year.Which decision can be made regarding this project
A)The project should definitely be accepted.
B)The decision to install the light is likely to require an evaluation of the trade-off between the worth of human life and the lost time waiting for the light to change signals.
C)The full cost of the traffic light will be relatively small since it only includes the purchase and installation costs.
D)The cost will invariably outweigh the benefit.

Accepted Answer

The proposal to install a traffic light will require an evaluation of the trade-off between the worth of human life saved and the cost of the time lost waiting for the light to change signals. While increased safety may be a significant benefit, the cost of installing and maintaining the traffic light must also be considered to determine if the project is justifiable. Therefore, option B is the best choice as it acknowledges the need for cost-benefit analysis before making a decision on the project.

Question 13

What have Canadian studies shown is the approximate value of a statistical life
A)under $1 million
B)$1 million to $3 million
C)$3 million to $12 million
D)over $15 million

Accepted Answer

Canadian studies have shown that the approximate value of a statistical life is between $3 million to $12 million.

Question 14

What is one way to eliminate the Tragedy of the Commons
A)increase law enforcement in public areas
B)limit access to the commons
C)increase access to the commons
D)provide more public land for recreation

Accepted Answer

Limiting access to the commons can effectively prevent overuse and depletion of shared resources, thereby eliminating the Tragedy of the Commons. This can be achieved through measures such as imposing entry fees, issuing permits, setting quotas, or establishing regulations to control usage levels. Increasing law enforcement, providing more public land, or increasing access to the commons may not necessarily address the root cause of the problem and could potentially exacerbate it.

Question 15

Studies have determined that the probability of a worker dying from exposure to a hazardous chemical used in the production of diet soft drinks is 0.0005.The cost of imposing a regulation that would ban this chemical is $18 million.If each person saved has a value equal to $10 million,how many people must the policy affect for benefits to exceed costs
A)1301
B)1801
C)2501
D)3601

Accepted Answer

The answer of Studies have determined that the probability of...

Question 16

Some goods can be either common resources or public goods,depending on which of the following
A)whether the good is rival in consumption
B)how policymakers deal with the good
C)the marginal cost of the good
D)whether the good is excludable

Accepted Answer

The answer of Some goods can be either common resources...

Question 17

Once it becomes obvious that a common resource is being overused,what happens
A)Market forces cause the use of the resource to shift to a sustainable level.
B)Society voluntarily limits its use of the good.
C)It continues to be overused because individuals have no incentive to reduce their use of the good.
D)The good becomes a club good.

Accepted Answer

When individuals have no incentive to reduce their use of the common resource, it will continue to be overused until it becomes depleted. This is known as the tragedy of the commons, where individuals prioritize their own short-term interests over the sustainability of the resource. Market forces and voluntary societal limits may be options to address the issue, but in the absence of proper incentives, they may not be enough to prevent overuse. Club goods are a separate category of goods that cannot be classified as common resources.

Question 18

Suppose a human life is worth $10 million.Installing a better lighting system in the city park would reduce the risk of a murder taking place there from 3.5 to 2.1 percent over the life of the system.At what cost should the city install the new lighting system
A)if its cost does not exceed $70,000
B)if its cost does not exceed $140,000
C)if its cost does not exceed $190,000
D)if its cost does not exceed $10,000,000

Accepted Answer

The reduction in risk is 1.4% (3.5% - 2.1%). The value of a human life is $10 million, so the expected benefit is 1.4% of $10 million, which is $140,000. Therefore, the city should install the system if the cost does not exceed $140,000.

Question 19

The local fire department wants to buy some new equipment at a cost of $2 million.If a human life is worth $10 million,the equipment is worth buying if it reduces the risk of someone dying in a fire over the life of the equipment by at least which of the following
A)1 percentage point
B)2 percentage points
C)7 percentage points
D)10 percentage points

Accepted Answer

The answer of The local fire department wants to buy...

Question 20

What are examples of careers that lend substance to the approach of valuing human life by evaluating the risks that people are voluntarily willing to take and the compensation they require for that risk
A)chartered accountants at tax time
B)construction workers on high-rise buildings
C)dentists
D)nurses

Accepted Answer

Construction workers on high-rise buildings are a good example of careers that value human life by evaluating risks and compensation. These workers must decide whether they are willing to take on the risk of working at such heights, while the compensation they receive reflects the level of risk involved in their work. Chartered accountants, dentists, and nurses may also deal with issues related to risk and compensation, but not to the same extent as construction workers on high-rise buildings.

Quiz 11: Public Goods and Common Resources

For use in cost-benefit analysis,how is the value of a human life sometimes calculated

Suppose that policymakers are doing cost-benefit analysis on a proposal to add traffic barriers to divide the flow of traffic in an effort to increase safety on a given highway.How can policymakers evaluate the costs and benefits of this proposal

When an infinite value is placed on human life,what will policymakers who rely on cost-benefit analysis likely do

To increase safety at a bad intersection,you must decide whether to install a traffic light in your home town at a cost of $20,000.If the traffic light reduces the risk of fatality by 0.5 percent and the value of a human life is about $10 million,what should you do

When the value of a human life is calculated according to the economic contribution a person makes to society (as reflected in their income-earning potential) ,what is the most reasonable conclusion to draw

Suppose that the cost of installing an overhead pedestrian walkway in a college town is $50,000.If the walkway is expected to reduce the risk of fatality by 0.5 percent and the cost of a human life is estimated at $5 million,what would the town do

Once a common resource is available for consumption,what do policymakers need to be concerned with

Suppose that installing an overhead pedestrian walkway would cost a college town $50,000.If the walkway is expected to reduce the risk of fatality by 2 percent and the cost of a human life was estimated at $5 million,what would the town do

When does the Tragedy of the Commons result

What have Canadian studies shown is the approximate value of a statistical life

What is one way to eliminate the Tragedy of the Commons

Some goods can be either common resources or public goods,depending on which of the following

Once it becomes obvious that a common resource is being overused,what happens

Suppose a human life is worth $10 million.Installing a better lighting system in the city park would reduce the risk of a murder taking place there from 3.5 to 2.1 percent over the life of the system.At what cost should the city install the new lighting system

The local fire department wants to buy some new equipment at a cost of $2 million.If a human life is worth $10 million,the equipment is worth buying if it reduces the risk of someone dying in a fire over the life of the equipment by at least which of the following

What are examples of careers that lend substance to the approach of valuing human life by evaluating the risks that people are voluntarily willing to take and the compensation they require for that risk