Question

There are two types of farming harvester machines on the market, the S650 and the S790. The only difference between the two is that the S650 is more prone to accidents than the S790.
Over their lifetime, two in ten S650s is expected to result in an accident, as compared to two in twenty S790s.

Further, one in one-thousand S650s is expected to result in a fatal accident, as compared to only one in five-thousand S790s.
The S650 sells for $120,000 while the S790 sells for $140,000.
At these prices, 2,000 of each model are purchased each year.

(a) What is the statistical value farmers place on avoiding a tractor accident? (b) What is the statistical value of a life of a farmer?

Answer 1

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