U.S.Truckingpaysitsdrivers$40,000peryear,whileAmericanTruckingpaysitsdrivers$38,
ID: 1116981 • Letter: U
Question
U.S.Truckingpaysitsdrivers$40,000peryear,whileAmericanTruckingpaysitsdrivers$38,000peryear. For both firms, truck drivers average 240,000 miles per year. Truck driving jobs are the same regardless of which firm one works for, except that U.S. Trucking gives each of its trucks a safety inspection every 50,000 miles while American Trucking gives each of its trucks a safety inspection every 36,000 miles. This difference in safety inspection rates results in a different rate of fatal accidents between the two companies. In particular, one driver for U.S Trucking dies in an accident every 12 million miles while one driver for American Trucking dies in an accident every 15 million miles. What is the value of a truckers life implied by the compensating differential between the two firms?
Explanation / Answer
Solution :- Calculation of value of truckers life implied in the given question :-
= (40000 - 38000) / (240000 / 12000000 - 240000 / 15000000)
= 2000 / (0.02 - 0.016)
= 2000 / 0.004
= $ 500,000.
Conclusion :- Value of truckers life implied in the given question = $ 500,000.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.