Question

Suppose that installing an overhead pedestrian walkway would cost a college town $150,000. The walkway is expected to reduce the risk of fatality by 3 percent, and the cost of a human life is estimated at $10 million. The town shouldA. install the walkway because the estimated benefit is twice the cost.B. install the walkway, since the cost of even a single life is too great not to take action.C. not install the walkway, since the cost is twice the estimated benefit.D. install the walkway because the estimated benefit equals the cost.

Answer 1

Answer:

A. install the walkway because the estimated benefit is twice the cost.

Explanation:

When undertaking a project there needs to be a comparison between the cost of project execution and the expected benefits of the project. If the benefit is higher than the cost then it is a viable undertaking. But when the cost is higher than the benefits then the organisation will need to abandon the project as it will not be cost effective and lead to loss.

In this secanrio the cost of the overhead pedestrian walkway is $150,000. We will compare with the expected benefit.

Benefit is the walkway is expected to reduce the risk of fatality by 3 percent, and the cost of a human life is estimated at $10 million.

Benefit= 0.03* 10,000,000

Benefit= $300,00

Therefore the benefit ($300,000) is twice if the cost ($150,000)