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13 February, 01:58

Billy Bob earns $45,000 and faces a. 007 probability of dying in a workplace accident. Jim Bob earns $41,000 and faces a. 0038 probability of dying in a workplace accident. The two require the same level of skill and training. From this information, what is the implicit value of a person's life?

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  1. 13 February, 03:36
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    Answer: $1,250,000

    Explanation:

    The implicit value of a person's life can be found by using the elasticity approach.

    i. e. On comparing the change/reduction in earnings with the change/reduction in probability of dying in a workplace accident.

    Given:

    Billy Bob earns $45000 with a 0.007 probability of accident

    whereas,

    Jim Bob earns $41000 with a 0.0038 probability of accident.

    thus, value of life = (45000 - 41000) / (0.007 - 0.0038) = $1,250,000
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