To increase safety at a bad intersection,you must decide whether to install a traffic light in your hometown at a cost of $25,000.If the traffic light reduces the risk of fatality by 0.3 percent,and the value of a human life is estimated to be $10 million,you should
A) install the light because the expected benefit of $30,000 is greater than the cost.
B) install the light because the expected benefit of $25,000 is greater than the cost.
C) not install the light because the expected benefit of $25,000 is only equal to the cost.
D) not install the light because the expected benefit of $3,000 is less than the cost.

Question

Quizplus · Accepted Answer

To calculate the expected benefit, we need to find the reduction in risk of fatality by 0.3 percent, which can be expressed as 0.003. The expected benefit can be calculated as follows:

Expected Benefit = (Value of a Human Life) x (Reduction in Risk of Fatality) x (Total Number of Vehicles per Day) x (Annual Average Number of Days per Year)
Expected Benefit = $10 million x 0.003 x Total Number of Vehicles x 365
Expected Benefit = $10,000 x Total Number of Vehicles x 1095

Assuming an average daily traffic count of 2000 vehicles, the expected benefit of installing the traffic light can be calculated as:

Expected Benefit = $10,000 x 2000 x 1095 = $21,900,000

Since the expected benefit of $21,900,000 is greater than the cost of $25,000, it is advisable to install the traffic light. Therefore, the best choice is option A.

To Increase Safety at a Bad Intersection,you Must Decide Whether