Question

To increase safety at a bad intersection, you must decide whether to install a traffic light in your hometown at a cost of $10,000. If the traffic light reduces the risk of fatality by 0.5 percent and the value of a human life is about $10 million, you should : a. A man should install the light because the expected benefit of $50,000 is greater than the cost.
b. A man should install the light because the expected benefit of $20,000 is greater than the cost.
c. A man should not install the light because the expected benefit of $10,000 is only equal to the cost.
d. A man should not install the light because the expected benefit of $5,000 is less than the cost.

Answer 1

Answer:

a. A man should install the light because the expected benefit of $50,000 is greater than the cost.

Explanation:

Let’s consider the cost required to install traffic lights= $10000

The expected benefit is equal to the value of human life * 0.5%.

= 0.5% * $10 million= $ 50000.  

The best option is to consider the most beneficial option to be taken. It is clear that installing traffic lights is more advantageous because the expected benefit of $50000 exceeds the cost of installing traffic lights.