1. Imagine you have been hired by an environmental agency to analyze the negative consequences of exposure to retox99, a new toxic molecule used in the IT industry. Assume that hedonic regressions on a representative sample suggest a willingness to pays of CHF 50 to reduce the fatality risk by 1/100'000.

(i) What is the implied VSL? Next, assume the agency consider the introduction of a new environmental regulation that could reduce that fatality risk from 6/100'000 to 2/100'000.

(ii) What is the maximum implementation cost of the new regulation that would still be compatible with a positive recommendation based on CBA?