Question
In: Economics
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 2 years agoRelated Solutions
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 =
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