To increase safety at a bad intersection,you must decide whether to install a traffic light in your hometown at a cost of $15,000.If the traffic light reduces the risk of fatality by 0.4 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 $40,000 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 $15,000 is only equal to the cost.
D) not install the light because the expected benefit of $4,000 is less than the cost.

Question

Quizplus · Accepted Answer

To calculate the expected benefit of installing the traffic light, we need to multiply the reduction in risk (0.4%) by the value of a human life ($10 million) and the number of cars passing through the intersection each year. Let's assume that 10,000 cars pass through the intersection each year.

Expected benefit = 0.4% x $10 million x 10,000 = $40,000

Since the expected benefit of installing the traffic light ($40,000) is greater than the cost ($15,000), the best choice is to install the light. Therefore, the answer is A.

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