Calculate the marginal benefit to society from the purchase of a PET scanner. Yes or no...

Calculate the marginal benefit to society from the purchase of a PET scanner. Yes or no on purchase in the decision column.

Probability that One cancer fatality could be at Prevented By a PET Scan		Value of One Life		Estimated Benefit	Cost of the Scanner	Decision
1 in 1,000,000	x		=
1 in 1,000	x		=
1 in 10	x		=
1 in 2	x		=

The cost of the scanner is $800,000. The value of one life is elevated to $10,000,000 now :)

Solutions

Expert Solution

Solution.

Following table can be generated with the help of given information

Probability that one cancer fatality could be prevented by a PET Scan			Value of one life		Estimated benefit	Cost of the Scanner	Decision
1 in 1000000 =	0.000001	X	10000000	=	10	800000	No
1 in 1000 =	0.001	X	10000000	=	10000	800000	No
1 in 10 =	0.1	X	10000000	=	1000000	800000	Yes
1 in 2 =	0.5	X	10000000	=	5000000	800000	Yes

In case of probability being 1 in 1000000, estimated benefit is lower than its cost. It is not advisable to purchase PET scanner in this case.

In case of probability being 1 in 1000, estimated benefit is lower than its cost. It is not advisable to purchase PET scanner in this case.

In case of probability being 1 in 10, estimated benefit is higher than its cost. It is advisable to purchase PET scanner in this case

In case of probability being 1 in 2, estimated benefit is higher than its cost. It is advisable to purchase PET scanner in this case

Rahul Sunny answered 1 year ago

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