Suppose that installing an overhead pedestrian walkway would cost a college town $50,000.If the walkway is expected to reduce the risk of fatality by 2 percent and the cost of a human life was estimated at $5 million,what would the town do
A)The town would install the walkway because the estimated benefit is twice the cost.
B)The town would install the walkway because the estimated benefit equals the cost.
C)The town would not install the walkway since the cost is twice the estimated benefit.
D)The town would install the walkway since the cost of even a single life is too great.

Question

Quizplus · Accepted Answer

The cost of installing the walkway is $50,000. The expected benefit of installing the walkway is a 2% reduction in the risk of fatality. The value of that benefit can be calculated as follows:

Value of Benefit = (2% x $5,000,000) = $100,000

Because the value of the benefit ($100,000) is twice the cost of installation ($50,000), the town would be making a wise investment by installing the pedestrian walkway. Therefore, choice A is the best option.

Suppose That Installing an Overhead Pedestrian Walkway Would Cost a College