The Occupational Safety and Health Administration (OSHA) has determined that the probability of a worker dying from exposure to a hazardous chemical used in the production of fertilizer is 0.008. The cost of imposing a regulation that would ban the chemical is $32 million. If the value of a human life is equal to $10 million, how many people must the policy affect in order for the benefits to exceed the costs?
A)256
B)401
C)3201
D)4001

Question

Quizplus · Accepted Answer

The expected benefit of the regulation can be calculated as follows:

Expected benefit = probability of death * value of a human life * number of affected workers
Expected benefit = 0.008 * $10 million * number of affected workers

The cost of the regulation is given as $32 million.

For the benefits to exceed the costs, we need:

Expected benefit > Cost
0.008 * $10 million * number of affected workers > $32 million
Number of affected workers > $32 million / $80,000
Number of affected workers > 400

Therefore, the policy must affect at least 401 workers for the benefits to exceed the costs. The closest option is B, 401.

The Occupational Safety and Health Administration (OSHA) Has Determined That