Suppose That a Small County Is Considering Adding a Guard

question 79

Multiple Choice

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. The average damage done to vehicles that slide off the road at the curve is $10,000. 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.

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Definitions:

Income Elasticity

A measure of how much the demand for a product changes in relation to a change in consumers' incomes.

Luxuries

Items or services that are considered non-essential but desirable, typically associated with high quality and a higher price.

Inelastic Demand

A situation where the quantity demanded of a good or service changes minimally in response to price changes.

Total Revenue

The total amount of money received by a company for goods sold or services provided during a certain period of time.