Suppose you are the mayor of a town and you want to increase safety at an intersection. A traffic light will increase safety and reduce fatality risk by 0.5% but costs $100,000. Suppose the value of human life is estimated at $10 million. Should you spend the money to install the traffic light? (Hint: to multiply 1% by 200 you follow this process: 0.01 x 200 = 2). Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. Yes, since the expected benefit ($500,000) exceeds the cost. b Yes, since the expected benefit ($150,000) exceeds the cost.

Suppose you are the mayor of a town and you want to increase safety at an intersection. A traffic light will increase safety and reduce fatality risk by 0.5% but costs $100,000. Suppose the value of human life is estimated at $10 million. Should you spend the money to install the traffic light? (Hint: to multiply 1% by 200 you follow this process: 0.01 x 200 = 2). Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. Yes, since the expected benefit ($500,000) exceeds the cost. b Yes, since the expected benefit ($150,000) exceeds the cost.

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter20: The Problem Of Adverse Selection Moral Hazard

Section: Chapter Questions

Problem 3MC

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