Suppose that the risk of dying in an automobile accident is reduced by 1 in 10,000 through the use of front seat air bags and that 10,000 auto buyers choose to purchase these air bags as an option at a price of $250. What is the implicit value of a life to these buyers?

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Quizplus · Accepted Answer

The implicit value of a life to these buyers can be calculated by dividing the total amount they are willing to spend ($250 x 10,000 = $2,500,000) by the number of lives saved (10,000 / 1). Therefore, the implicit value of a life to these buyers is $2.5 million.

Suppose That the Risk of Dying in an Automobile Accident