The mayor of Newton is considering proposals to deal with an unsafe intersection. She could install a traffic light at a cost of $50,000 or she could install stop signs at a cost of $5,000. The traffic light is expected to reduce the risk of fatality by 0.45 percent and the stop signs are expected to reduce the risk of fatality by 0.054 percent. If the value of human life is estimated to be $10 million, what choice should the mayor make? Briefly explain.

It is observed through workings that the benefits of installing traffic signals are less than the cost of installation and the benefit of installing stop signs exceeds the cost of installing them, therefore it will be wise for Mayor to install stop signs rather than ls signals.

DATA

Value of human life = $10 million

Cost of installing traffic signal = $50,000

Cost of installing stop signs = $5,000

Workings

Benefit ofinstalling traffic signal = 0.45% * $10 million

Benefit ofinstalling traffic signal = $45,000

Benefit from installing stop signs = 0.054% * $10 million

Benefit from installing stop signs = $5,400