If a person would buy equipment with safety features that cost $100 extra and those features reduce the chance of having a fatal accident by 1/500, the person is implicitly valuing his or her life at a minimum of:
A) $5.
B) $5,000.
C) $50,000.
D) $500,000.

Question

Quizplus · Accepted Answer

The person is implicitly valuing his or her life at a minimum of $50,000 because they are willing to pay $100 for a 1/500 reduction in the chance of having a fatal accident. This means that they are valuing their life at $50,000 / (1/500) = $50,000.

If a Person Would Buy Equipment with Safety Features That