Question 1

Using the compensating differential approach, the value of a life is calculated as

Accepted Answer

A)  the compensating differential multiplied by the increased chance of death. 
B)  the sum of the compensating differential and the increased chance of death. 
C)  the compensating differential divided by the increased chance of death. 
D)  the difference between the compensating differential and the increased chance of death. 
A)  the compensating differential multiplied by the increased chance of death. 
B)  the sum of the compensating differential and the increased chance of death. 
C)  the compensating differential divided by the increased chance of death. 
D)  the difference between the compensating differential and the increased chance of death.

Question 2

The cost-benefit analysis on the financial impact smokers have on society conducted by Vanderbilt professor Kip Viscusi concludes that

Accepted Answer

A)  smokers provide a net public service to society. 
B)  smokers are a financial drain on society. 
C)  smokers contribute less to retirement and pension programs than they receive from those programs. 
D)  smokers account for about 32 cents of net cost to everyone else in society for every pack of cigarettes smoked. 
A)  smokers provide a net public service to society. 
B)  smokers are a financial drain on society. 
C)  smokers contribute less to retirement and pension programs than they receive from those programs. 
D)  smokers account for about 32 cents of net cost to everyone else in society for every pack of cigarettes smoked.

Question 3

According to the U.S. National Safety Council, a person has a better chance of being killed in which of the following situations?

Accepted Answer

A)  in an aircraft accident 
B)  from being electrocuted 
C)  while riding a bicycle 
D)  while walking 
A)  in an aircraft accident 
B)  from being electrocuted 
C)  while riding a bicycle 
D)  while walking

Question 4

According to cost-benefit analysis, where safety is concerned

Accepted Answer

A)  it is possible to not be safe enough. 
B)  it is possible to be too safe. 
C)  it is possible to be just safe enough. 
D)  All of the above are possible. 
A)  it is possible to not be safe enough. 
B)  it is possible to be too safe. 
C)  it is possible to be just safe enough. 
D)  All of the above are possible.

Question 5

The lost-income approach tends to value a life at a higher amount than does the compensating differential approach.

Accepted Answer

A) True 
 B)False

Question 6

It is impossible for corporations to avoid trading their own gain against others' lives.

Accepted Answer

A) True 
 B)False

Question 7

Gerald is deciding what kind of light bulbs to install in the light fixtures in his new home. He has it narrowed down to compact fluorescent bulbs (CFLs) or LED bulbs. The CFLs will cost $350 and the LEDs will cost $900. Gerald estimates that the energy-saving benefits from the CFLs will be $750 and the energy-saving benefits from the LEDs will be $1,250. Based on these numbers, Gerald should purchase the

Accepted Answer

A)  CFLs because the cost is cheaper. 
B)  CFLs because the the net benefit is greater. 
C)  LEDs because the benefit is greater. 
D)  LEDs because the net benefit is greater. 
A)  CFLs because the cost is cheaper. 
B)  CFLs because the the net benefit is greater. 
C)  LEDs because the benefit is greater. 
D)  LEDs because the net benefit is greater.

Question 8

Uni-Go Company makes motorized unicycles. Uni-Go is deciding whether to include a safety feature that would cost $6 for each unicycle. Uni-Go estimates the probability of death without the safety feature is 1/90,000 and the death cost per unicycle is $5.55. Uni-Go's cost-benefit recommendation is to

Accepted Answer

A)  add the safety device. 
B)  not add the safety device. 
C)  add the safety device plus additional safety devices. 
D)  not produce the unicycle. 
A)  add the safety device. 
B)  not add the safety device. 
C)  add the safety device plus additional safety devices. 
D)  not produce the unicycle.

Question 9

Isabel can work as a rodeo clown, where the probability of being killed in a work-related accident is 5/10,000, or she can earn work as a sword swallower, where the probability of being killed in a work-related accident is 3/10,000. Using the compensating differential approach, the value of Isabel's life is $5 million. How much more per year will working as a rodeo clown pay than working as a sword swallower?

Accepted Answer

Additional pay = $5

Question 10

Uni-Go Company makes motorized unicycles. Uni-Go is deciding whether to include a safety feature that would cost $6 for each unicycle. Uni-Go estimates the probability of death without the safety feature is 1/90,000 and the death cost per unicycle is $5.55. If Uni-Go has underestimated by one-half the true value of a life, then the true cost-benefit recommendation would be for Uni-Go to

Accepted Answer

A)  add the safety device. 
B)  add the safety device and all other safety devices available. 
C)  not add the safety device. 
D)  not add the safety device nor any other safety devices. 
A)  add the safety device. 
B)  add the safety device and all other safety devices available. 
C)  not add the safety device. 
D)  not add the safety device nor any other safety devices.

Question 11

Suppose that the local health board discovers some unsanitary conditions at your favorite sushi restaurant. An economist would likely have what to say about this situation?

Accepted Answer

A)  "All unsanitary conditions at this restaurant must be eliminated." 
B)  "The restaurant owner obviously cares more about profits than about his customers." 
C)  "No one should eat at this restaurant due to the potential health hazard." 
D)  "Eliminating all of the unsanitary conditions might cost more than the value of the benefits that would be gained." 
A)  "All unsanitary conditions at this restaurant must be eliminated." 
B)  "The restaurant owner obviously cares more about profits than about his customers." 
C)  "No one should eat at this restaurant due to the potential health hazard." 
D)  "Eliminating all of the unsanitary conditions might cost more than the value of the benefits that would be gained."

Question 12

You are trying to decide if you should take a day off from work to go to a casino. In making your decision, you compare what you would sacrifice to go to the casino (lost wages for the day, potential losses at the casino, the amount of work you will have to make up, etc.) with the enjoyment you would receive from the day off (relaxation, potential winnings, etc.). The analysis you have just conducted is called

Accepted Answer

A)  cost-benefit analysis. 
B)  comparative advantage analysis. 
C)  stress analysis. 
D)  sacrificial-wage analysis. 
A)  cost-benefit analysis. 
B)  comparative advantage analysis. 
C)  stress analysis. 
D)  sacrificial-wage analysis.

Question 13

Companies are never justified in not installing all possible safety devices in their products when the omission of those safety devices could result in the loss of life to the users of the products.

Accepted Answer

A) True 
 B)False

Using the compensating differential approach, the value of a life is calculated as

The cost-benefit analysis on the financial impact smokers have on society conducted by Vanderbilt professor Kip Viscusi concludes that

According to the U.S. National Safety Council, a person has a better chance of being killed in which of the following situations?

According to cost-benefit analysis, where safety is concerned

The lost-income approach tends to value a life at a higher amount than does the compensating differential approach.

It is impossible for corporations to avoid trading their own gain against others' lives.

Uni-Go Company makes motorized unicycles. Uni-Go is deciding whether to include a safety feature that would cost $6 for each unicycle. Uni-Go estimates the probability of death without the safety feature is 1/90,000 and the death cost per unicycle is $5.55. Uni-Go's cost-benefit recommendation is to

Suppose that the local health board discovers some unsanitary conditions at your favorite sushi restaurant. An economist would likely have what to say about this situation?

Companies are never justified in not installing all possible safety devices in their products when the omission of those safety devices could result in the loss of life to the users of the products.

Fundamental Concepts in Economics

Basic Game Theory: Games Between Two Players

Game Theory: Games Between Three or More Players

Free Exchange: Individual and International Trade

The Market System: Functions, Structure, and Institutions

The Nature of Pollution Problems

Government Policies to Regulate Pollution

Resource Depletion and Sustainability

Public Goods and the Role of Government

Public Goods: Tackling Large Projects and Eminent Domain

The Volunteers Dilemma: a Collective Inaction Problem

Voting: You Cant Always Get What You Want

The Economics of Health Insurance and Health Care

Segregation and Discrimination

Gross Domestic Product and the Wealth of Nations: an Introduction to the Macroeconomy

Unemployment

An Introduction to Money, Banks, and the Financial System

The Federal Reserve: Monetary Policy, Economic Activity, and Inflation

The Federal Government: Taxes, Spending, and Fiscal Policy

Income Inequality and the Redistribution of Income

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Exam 2: Cost-Benefit Analysis and the Value of a Life

Using the compensating differential approach, the value of a life is calculated as

The cost-benefit analysis on the financial impact smokers have on society conducted by Vanderbilt professor Kip Viscusi concludes that

According to the U.S. National Safety Council, a person has a better chance of being killed in which of the following situations?

According to cost-benefit analysis, where safety is concerned

The lost-income approach tends to value a life at a higher amount than does the compensating differential approach.

It is impossible for corporations to avoid trading their own gain against others' lives.

Suppose that the local health board discovers some unsanitary conditions at your favorite sushi restaurant. An economist would likely have what to say about this situation?

Companies are never justified in not installing all possible safety devices in their products when the omission of those safety devices could result in the loss of life to the users of the products.

Fundamental Concepts in Economics

Basic Game Theory: Games Between Two Players

Game Theory: Games Between Three or More Players

Free Exchange: Individual and International Trade

The Market System: Functions, Structure, and Institutions

The Nature of Pollution Problems

Government Policies to Regulate Pollution

Resource Depletion and Sustainability

Public Goods and the Role of Government

Public Goods: Tackling Large Projects and Eminent Domain

The Volunteers Dilemma: a Collective Inaction Problem

Voting: You Cant Always Get What You Want

The Economics of Health Insurance and Health Care

Segregation and Discrimination

Gross Domestic Product and the Wealth of Nations: an Introduction to the Macroeconomy

Unemployment

An Introduction to Money, Banks, and the Financial System

The Federal Reserve: Monetary Policy, Economic Activity, and Inflation

The Federal Government: Taxes, Spending, and Fiscal Policy

Income Inequality and the Redistribution of Income

Filters