Question

M & S Corp has a fertilizer plant. The probability of an explosion at the plant depends on how much the firm spends on safety as given by the table. If an explosion occurs, the loss to society (damaged equipment, death of employee, etc) is expected to be $250 million. Find the optimal level of safety expenditure.

Safety expenditure ( m)       Probability of loss

$ 0.0                         0.030

0.5                         0.020

1.0                         0.016

1.5                         0.013

2.0                         0.011

2.5                         0.010

Answer 1

Ans 0.9250

Safety expenditure ( m) (I)	Probability of loss (II)	optimal level of safety expenditure (I) * (II)
0.0	30%	0.0000
0.5	20%	0.1000
1.0	16%	0.1600
1.5	13%	0.1950
2.0	11%	0.2200
2.5	10%	0.2500
	TOTAL	0.9250