Answer to Question #254872 in Macroeconomics for EBUBE

Question

1. According to Viscusi and Gayer(2005), regulations in the United States vary greatly in the cost per each life they save and the value of life is between $4 million and $10 million(Viscusi, 2006). The regulation to install passive restraints in vehicles has a cost per life saved of $600,000, whereas the regulation to remove asbestos in workplaces has a cost per life saved of $180 million. What regulations pass a cost-benefit test? How might resources be shifted between these regulations in order to reduced cost or save more lives?

Answer 1

A cost benefit analysis is a process used to analyze which decisions to take and which to forgo. It takes into account rewards expected from a situation minus total costs. The regulation to install passive restraints in vehicles meets the cost benefit test from its attainable cost.

In order to save more lives it's important to allocate more resources to enhance removal of asbestos in workplaces. In doing so it will be productive in generating more income since the population will be healthy.