To Increase Safety at a Bad Intersection,you Must Decide Whether

question 11

Multiple Choice

To increase safety at a bad intersection,you must decide whether to install a traffic light in your hometown at a cost of $15,000.If the traffic light reduces the risk of fatality by 0.4 percent,and the value of a human life is estimated to be $10 million,you should

• A) install the light because the expected benefit of $40,000 is greater than the cost.
• B) install the light because the expected benefit of $20,000 is greater than the cost.
• C) not install the light because the expected benefit of $15,000 is only equal to the cost.
• D) not install the light because the expected benefit of $4,000 is less than the cost.

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Definitions:

Excludable

A characteristic of a good or service that allows owners or producers to prevent others from using it without permission.

Over Supplied

A market condition where the quantity of a good or service available exceeds the quantity demanded at the current price, often leading to a surplus and typically pressure on prices to decrease.

Marginal Cost

The rise in expenses for producing one more unit of a product or service.

Efficient Amount

The level of production or consumption that maximizes welfare and minimizes waste within an economy, often used in reference to optimal resource allocation.