Question

Suppose that a small county is considering adding a guard rail to a dangerous curve by a river. The guard rail will cost $70,000. The average damage done to vehicles that slide off the road at the curve is $10,000. It is expected that the guard rail will prevent 5 vehicles from sliding off the road during its usable life. What should the county do? a. Install the guard rail because the benefits exceed the costs. b. Do not install the guard rail because the costs exceed the benefits. c. Install the guard rail because safety is priceless. d. Do not install the guard rail at any cost because drivers can purchase private insurance for their vehicles.

Answer 1

Answer:

b. Do not install the guard rail because the costs exceed the benefits

Explanation:

The cost of the guard rail is $70,000.

The average damage to a car that slides off the road at the curve is $10,000.

Number of cars the guard rail is expected to save from sliding off the road is 5.

Therefore, Total damage prevented/saved is 5 * $10,000= $50,000

Total cost of installing the guard rail is $70,000

So, the cost exceed the benefits.

It is expected the county will not install the guard rail because the total cost outweighs the benefits.