Highway engineers have proposed improving a dangerous stretch of highway at a cost of $1.5 million.They expect that it will reduce the risk of someone dying in an accident over the life of the highway from 18.3 percent to 7.8 percent.The project would be worth doing as long as a human life is worth at least
A) $117,000.
B) $157,500.
C) $274,500.
D) $1.5 million.

Question

Quizplus · Accepted Answer

To determine if the project is worth doing, we need to calculate the value of a human life saved due to the proposed improvement.

Value of a human life saved = Cost of project ÷ (Probability of death without improvement - Probability of death with improvement)

Value of a human life saved = $1.5 million ÷ (18.3% - 7.8%)

Value of a human life saved = $157,500

Therefore, the project would be worth doing as long as a human life is worth at least $157,500. Choice B is the closest value.

Highway Engineers Have Proposed Improving a Dangerous Stretch of Highway