Suppose That the Cost of Installing an Overhead Pedestrian Walkway

question 69

Multiple Choice

Suppose that the cost of installing an overhead pedestrian walkway in a college town is $150,000. The walkway is expected to reduce the risk of fatality by 1.5 percent, and the cost of a human life is estimated at $10 million. The town should

• A)install the walkway because the estimated benefit is twice the cost.
• B)be indifferent between installing and not installing the walkway because the estimated benefit equals the cost.
• C)not install the walkway, since the cost is twice the estimated benefit.
• D)install the walkway, since the cost of even a single life is too great not to take action.

---

Definitions:

Capital Gains

Capital gains arise from the sale of an asset at a price higher than its purchase price, resulting in a profit.

Market Value

The current price at which an asset or a service can be bought or sold in an open market.

Investments

Assets purchased with the expectation that they will generate income in the future or appreciate in value for future resale.

Operating Cash Flow

The revenue generated by a company through its primary business functions.