Question

If a painter tells you that he would spent $30 on a resperator (but not $31) that protects him from paint fumes that produce a 0.01% chance of killing him? How much cash value would you say that he places on his life?

Answer 1

Answer:

$300,000

Explanation:

Data provided in the question:

Amount the painter would like to spend on a respirator = $30

Chances of paint fume killing the painter = 0.01%

Now,

The cash value he places on the life of painter

= [ Amount spent on respirator ] ÷ [ Probability of death ]  

or

= 30 ÷ 0.01%

or

= 30 ÷ 0.0001

or

= $300,000