Question

Mr. Steve is going to give a total of $2 million to his 500 employees divided in equal amounts. Mr. Steve got an estimate of the cost of repairing (which he did ot do) the slippery floor where his employees work and it also equals $2 million. So it looks like he is giving the bonus in lieu of making the workplace safer. The odds of a death in this workplace is 1 in 3,000.

Part 1) With these numbers how much is Steve valuing the life of 1 typical employee?

Group of answer choices

$3,000

not enough information to determine

$12 million

500

$2 million

Part 2) now assume there are are 2,500 employees. The value of 1 life of a worker is indirectly estimated at

Group of answer choices

$120 million

$1.2 million

$120,000

$400,000

$2.4 million

Answer 1

1. The correct option is 3- $12 million

Mr. Steve is paying 500 workers a 2million bonus overall, the same it would cost him to repair the stairs. At the same time, there is a 1/3000 chance of death. This means, according to him

Value of death of a typical worker/chance of death=Value of bonus/total number of workers getting bonus. Putting in vaues, we get.

Value of death of a typical worker=2m*3000/500=$12m.

2. The correct option is E-2.4 million.

Using the same formula as in part A and putting in values now, we get

Value of death of a typical worker=2m*3000/2500=$2.4m