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Exam_2_Review_1_Exam

# Exam_2_Review_1_Exam - My value of statistical life lies...

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Review Session Notes We also reviewed the travel cost method of valuation. For an example see question # 3 from HW 5. Value of a Statistical Life Suppose that you presently work at a job with little risk of death, and you were offered another job that was exactly the same except that it paid you \$50 more per year and it increased your risk of death by 1/100,000. Suppose you rejected this job opportunity because of the additional risk. The next day you accepted a very similar job that had a bit higher risk (1/80,000) and paid you \$80 more per year. a.Using value of statistical life techniques, what can we say about how much you value your life? (be sure to show how you calculated this value) \$50/(1 life/100,000 ) = \$5 million/life \$80/(1 life/800,000) = \$6.4 million/life
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Unformatted text preview: My value of statistical life lies between %5 and \$6.4 million. b. If you were advising the EPA and they said everyone is just like you, what level of risk protection, i.e., A,B,C, D, E, F, or G, would you recommend they provide with this project? Why? Level of Protection Total Number of Lives Saved Marginal Cost per Additional Life Saved A 1 \$100,000 B 2 \$500,000 C 3 \$1,000,000 D 4 \$2.500,000 E 5 \$5,000,000 F 6 \$7,500,000 G 7 \$10,000,000 I would choose level E (5 lives saved) as the MB (VSL) of a life lie between \$5 and \$6.4 million and the MC(\$7,500,000) of saving a 6 th life (level F) exceed this range. Hence society would be made worse off by saving the 6 th life as MC>MB. For levels A-E the reverse is true: MC<MB....
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