Suppose a Treacherous Stretch of Road Winds Through Deadman's Canyon

question 109

Multiple Choice

Suppose a treacherous stretch of road winds through Deadman's Canyon for 5 miles.A highway department study estimates that better lighting would reduce the traffic fatality rates as follows: $$\begin{array} { c c c } \text { Number of lights } & \text { Estimated deaths per year } & \text { Total installation cost (in millions) } \\0 & 3 & \$ 0 \mathrm {~m} \\1 & 2 & \$ 3 \mathrm {~m} \\2 & 1.5 & \$ 7 \mathrm {~m} \\3 & 1.2 & \$ 12 \mathrm {~m} \\4 & 1 & \$ 18 \mathrm {~m} \\5 & 0.9 & \$ 25 \mathrm {~m}\end{array}$$
Applying economic analysis to determine expenditures on safety improvements that save lives

• A)is impossible because it is impossible to place a dollar value on human life.
• B)assures that the most lives are saved at the lowest opportunity cost.
• C)biases life-saving expenditures in favor of high-technology safety improvements.
• D)would require that all resources be reallocated away from entertainment,education,and other non-safety uses to public safety agencies.

---

Definitions:

Variable Cost

Expenses that change in proportion to the activity of a business, such as costs for raw materials or production inputs, which vary with the level of output.

Fixed Costs

Fixed costs are business expenses that remain constant regardless of the amount of goods or services produced, such as rent or salaries.

Selling Price

The amount of money for which something is sold to a customer.

Operating Cash Flow

The cash generated by a company's normal business operations, indicating whether a company is able to generate enough positive cash flow to maintain and grow its operations.