Question

Suppose residents of the town of Beachville are concerned about shark attacks and are considering installing a shark warni s ter on its main beach. The sharks in the waters around Beachville are highly dangerous and an attack always results in the death of the victim Here is some information you may or may not find useful to answer the questions below! • The shark warning system would decrease the chance of a shark attack from 0.05% to 0.01%. • The value of a human life is $10 million • The value of a shark's life is $0.7 million • The cost of the shark warning system is $6,000. The expected benefit of the shark warning system is $ the cost, it is socially optimal Since the benefit is for the shark warning system to Check

Answer 1

dusver: The Slaube whining sedemn nosht denotes the chance of a shark attack from oost to o.oil . The value of a human life is $ 10 milion → The value q Shark's life is 107 million - The cost of the shook warning system is $6,000 The chance of shook attack shell seduce from ocos too. col do , reduced chance of Shouk attack = 0.005 - 0.001 = 0.004 as saying that the human death chance This is shall same seduce by 0.004 Given that value of a hurran life = $ 10m The expected benefit of such system is = 0.0044 * $100 =40,000

The cost of such Wooning system = $6,000 clearly benefit of the System is greater than its cost $40,000 > $6,000) And do it is optimal for the shook worning System to be installed