To increase safety at a bad intersection, you must decide whether to install a traffic light in your hometown at a cost of $10,000. If the traffic light reduces the risk of fatality by 0.5 percent and the value of a human life is about $10 million, you should : a. A man should install the light because the expected benefit of $50,000 is greater than the cost.

b. A man should install the light because the expected benefit of $20,000 is greater than the cost.

c. A man should not install the light because the expected benefit of $10,000 is only equal to the cost.

d. A man should not install the light because the expected benefit of $5,000 is less than the cost.

Question

Business

Case Clarke

10 September, 15:46

To increase safety at a bad intersection, you must decide whether to install a traffic light in your hometown at a cost of $10,000. If the traffic light reduces the risk of fatality by 0.5 percent and the value of a human life is about $10 million, you should : a. A man should install the light because the expected benefit of $50,000 is greater than the cost.

b. A man should install the light because the expected benefit of $20,000 is greater than the cost.

c. A man should not install the light because the expected benefit of $10,000 is only equal to the cost.

d. A man should not install the light because the expected benefit of $5,000 is less than the cost.

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Answers (1)

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Kenny Mcdonald · Answer 1

a. A man should install the light because the expected benefit of $50,000 is greater than the cost.

Explanation:

Let's consider the cost required to install traffic lights = $10000

The expected benefit is equal to the value of human life * 0.5%.

= 0.5% * $10 million = $ 50000.

The best option is to consider the most beneficial option to be taken. It is clear that installing traffic lights is more advantageous because the expected benefit of $50000 exceeds the cost of installing traffic lights.