A handgun manufacturer can make its handguns safer by adding a fingerprint recognition device to its products, so only the owner would be able to fire the gun. Adding the fingerprint recognition device costs $145 per handgun. The manufacturer estimates that this will prevent 150 injuries for every 100,000 handguns sold and that, on average, each injury causes $120,000 of harm. The manufacturer
A) should add the fingerprint recognition device because it is cost justified.
B) should add the fingerprint recognition device even though it is not cost justified.
C) should not add the fingerprint recognition device because it is not cost justified.
D) should not add the fingerprint recognition device because this will reduce profits.

Question

Quizplus · Accepted Answer

The cost of adding the fingerprint recognition device ($145 per handgun) is justified by the reduction in harm costs ($120,000 per injury prevented). Preventing 150 injuries for every 100,000 handguns sold results in a savings of $18,000,000 (150 injuries * $120,000), which outweighs the cost of adding the device to each handgun when sold at scale.

A Handgun Manufacturer Can Make Its Handguns Safer by Adding