1A) Suppose a human life is worth $18 million. Increasing the ozone standards wo
ID: 1168824 • Letter: 1
Question
1A) Suppose a human life is worth $18 million. Increasing the ozone standards would reduce the risk of someone dying from 39.9% to 11.5% over the life of this new regulation. The new ozone standard should be adopted if its cost does not exceed how much money? (input only numbers in your answer)
1B) Assume the value of a statistical life is $99,000,000 and that workers in more dangerous jobs are exposed to an additional 1/298 risk of death. How much more should the workers in the more dangerous jobs be paid (compared to the other workers)?
1C) In a study of Minneapolis it was found that the elasticity of house values with respect to a NEF is -0.58. A NEF is a measure of aircraft noise related to human hearing and discomfort. This means that an
increase of NEFs of 5.8% produces a decrease in housing values of 1%
increase of NEFs of 1% produces an increase in housing values of 5.8%
increase of NEFs of 0.58% produces a decrease in housing values of 0.58%
increase of NEF of 1% produces an increase in housing values of 0.58%
increase of NEFs of 0.1% produces a decrease in housing values of 0.58%
increase in NEFs of 1% produces a decrease in housing values of 0.58%
increase of NEFs of 5.8% produces a decrease in housing values of 1%
increase of NEFs of 1% produces an increase in housing values of 5.8%
increase of NEFs of 0.58% produces a decrease in housing values of 0.58%
increase of NEF of 1% produces an increase in housing values of 0.58%
increase of NEFs of 0.1% produces a decrease in housing values of 0.58%
increase in NEFs of 1% produces a decrease in housing values of 0.58%
Explanation / Answer
1A.
Since the risk of dying reduces, value of life increases.
Number of times of increasing the value of life = 39.9% / 11.5% = 3.47 times.
Therefore, the required cost of new standard must not exceed ($18 million × 3.47 =) $62.46 million. (ANSWER)
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