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 dinar.The average damage done to vehicles that slide off the road at the curve is 10,000 dinar.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 safety is priceless.
B)Install the guard rail because the benefits exceed the costs.
C)Do not install the guard rail because the costs exceed the benefits.
D)Do not install the guard rail at any cost because drivers can purchase private insurance for their vehicles.

Question

Quizplus · Accepted Answer

The cost of the guard rail is 70,000 dinar, while the benefit (preventing damage to 5 vehicles at 10,000 dinar each) is 50,000 dinar. Since the costs exceed the benefits, the county should not install the guard rail.

Suppose That a Small County Is Considering Adding a Guard