To increase safety at a bad intersection,you must decide whether to install a traffic light in your hometown at a cost of $10,000.If the traffic light reduces the risk of fatality by 0.5 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 $50,000 is greater than the cost.
B)install the light because the expected benefit of $20,000 is greater than the cost.
C)not install the light because the expected benefit of $10,000 is only equal to the cost.
D)not install the light because the expected benefit of $5,000 is less than the cost.

Question

Quizplus · Accepted Answer

The expected benefit of the traffic light is calculated as the reduction in the risk of fatality multiplied by the value of a human life.

Expected benefit = (0.5% reduction in risk of fatality) x ($10 million value of a human life)

Expected benefit = 0.005 x $10 million

Expected benefit = $50,000

Since the expected benefit of installing the traffic light is greater than the cost of $10,000, it is the best choice to install the traffic light to increase safety at the bad intersection in the hometown.

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