The cost of repositioning an automobile gas tank for greater safety is $11 per vehicle for 12.5 million vehicles. It is expected that 180 deaths will occur if the gas tank location is not redesigned. Failure to redesign the gas tank location therefore implies that the automobile company is implicitly valuing human life at:
A) exactly $500,000.
B) more than $736,889.
C) less than $736,889.
D) more than $1,000,000.

Question

Quizplus · Accepted Answer

The total cost of redesigning is $11 * 12.5 million = $137.5 million. If 180 deaths occur without redesign, the implicit value per life is $137.5 million / 180 = $763,889. Since the company is not redesigning, it values life at less than $763,889, which is less than $736,889.

The Cost of Repositioning an Automobile Gas Tank for Greater