Suppose that installing an overhead pedestrian walkway would cost a college town $80,000.The walkway is expected to reduce the risk of fatality by 1.6 percent,and the cost of a human life is estimated at $10 million.The town should
A) install the walkway because the estimated benefit is twice the cost.
B) install the walkway because the estimated benefit equals the cost.
C) not install the walkway,since the cost is twice the estimated benefit.
D) install the walkway,since the cost of even a single life is too great not to take action.

Question

Quizplus · Accepted Answer

The estimated benefit of reducing the risk of fatality by 1.6 percent can be calculated as follows:

Expected number of lives saved = total population * mortality rate * percentage reduction due to the walkway
= 10,000 * 0.01 * 0.016
= 1.6

Expected benefit = expected number of lives saved * value of a human life
= 1.6 * $10 million
= $16 million

Therefore, the estimated benefit of installing the walkway is twice the cost ($16 million vs. $80,000), which makes it a worthwhile investment for the town.

Suppose That Installing an Overhead Pedestrian Walkway Would Cost a College