Uni-Go Company makes motorized unicycles. Uni-Go is deciding whether to include a safety feature that would cost $6 for each unicycle. Uni-Go estimates the probability of death without the safety feature is 1/90,000 and the death cost per unicycle is $5.55. If Uni-Go has underestimated by one-half the true value of a life, then the true cost-benefit recommendation would be for Uni-Go to

Question

Quizplus · Accepted Answer

The true cost of a death per unicycle is underestimated by half, so the actual cost is $5.55 * 2 = $11.10. Since this cost ($11.10) is higher than the cost of adding the safety feature ($6), the cost-benefit analysis recommends adding the safety device.

Uni-Go Company Makes Motorized Unicycles