Question 2: THE CORONAVIRUS TRADE-OFF: LIFE VS. ECONOMY Coronavirus disease 2019 (which is also known as COVID-19) is an infectious disease caused by severe acute respiratory syndrome coronavirus 2 (SARS-CoV-Z) (WHO, 2020). Although the origin of the virus is not still known, the disease was rst identied in December 2019 in Wuhan, China (Hui D. et af, 2020). Since then, the virus has rapidly spread globally, leading to the current 201920 coronavirus pandemic, in such a drastic way that as of the beginning of 2021 (which is the date when I am writing this question for you), more than 30 million cases have been reported in more than 200 countries, and more than 1,800,000 people have died due to this virus within just 14 months since the rst case was identied. The virus is spread among people very easily when they are in close proximity and its spread primarily occurs through small droplets produced during coughing, sneezing, talking, or even breathing. In light of this fact, preventive measures to reduce the chances of infection include staying at home, avoiding crowded places, and practicing social- distancing strategies are introduced by epidemiologists as effective ways to reduce the contact of infected persons with large crowds by closing schools, universities, and workplaces, restricting and banning travel, and cancelling large public gatherings such as sports events, which all caused the US economy to move fast towards a serious recession, or in the worst-case scenario, a depression (God forbid!). The pace of this downturn was so fast that, according to a report by CBS News on May 21 2020, around 40 million Americans had led for unemployment benets just in the four-month period before the report was rescaled, and a rapid, unprecedented downturn in the US. economy occurred, and the nation had come to the conclusion that it was necessary to combat the deadly COVID-l9 by keeping as many people as possible at home. This was viewed as a leading indicator of a recession yet to happen. In an article published in Bloomberg at the end of March 2020, Clive Crook (2020) says that \"Whether we like it or not, the choice between lives and the economy is already dictating events.\" He also adds that \"The coronavirus crisis is terrifying not just for its potentially staggering scale, but also for its resistance to rational analysis. It's forcing governments to make enormously consequential decisions without knowing what the results will be or how altemative courses of action might have played out.\" He goes on to say that \"This state of affairs is so unsettling to the rational mind that one longs for rules of thumb that suspend doubt, set complications and trade-offs aside, and offer some clarity.\" He also states \"Amid this extreme uncertainty, a crucial trade-off persists between the steps you take now to save lives and the damage those steps will do to the economy. At rst sight, in the spirit of 'just do everything,' one longs to deny this trade-off: Governments should move instantly to save as many lives as possible, while reducing the economic damage as far as they can.\" He also mentions \"An unacknowledged trade-off between saving lives and inicting economic harm is simply unavoidable.\" And, nally he says \"But, much as we might want to ignore it, the underlying trade-off between ghting the disease and crushing the economy can't be denied. Whether we admit it or not, it's already dictating events.\" This article is just one example of the scholars who have addressed this trade-off across the globe. This trade-off has been addressed by many others recently under different terms, examples of which include Medical Penalty vs. Economic Penalty, OR Medical Penalty vs. Income Penalty, OR Health vs. Economy, OR Lives Saved vs. Income Generated/Earned, OR Deaths vs. Jobs. To simply matters, here we call this the trade-off between Saved Lives (YL) vs. Saved Jobs 03). As you all certainly know, one common/popular way to model trade-off relationships in economics is to use a Production Possibilities Curve (aka Production Possibilities Frontier), or for short PPC. Accordingly, you can put the number of lives saved on the horizontal axis and the number of jobs saved on the vertical axis of a diagram and draw a PPC curve for it. A downward-sloping PPC curve would represent the trade-off relationship between the two variables. We usually use the common shape of the PPC curve, which is concave with respect to the origin of the coordinate system, to represent the property of increasing opportunity costs with increased quantity of either of the outcomes, which is more realistic (than just a straight-line PPC) to model real-world economic phenomena. The above-described, staticl (i.e. one-period) trade-off relationship between Saved Lives H L) vs. Saved Jobs (Y1) can easily be modeled by such a PPC curve that I described above. I have put together such a hypothetical PPC curve for a hypothetical economy for you to be able to work with it. For the sake of simplication, I have selected 5 specic example points on this curve (with the following coordinates of YL and Y1, respectively, for each of the 5 points, being (YL = I) , YJ = 10) for Point (5), (0.5 , 9) for Point (4), (0.3 , 5) for Point (3), (0.9 , 3) for Point (2), and (l , 0) for Point (1)), so that you can narrow your attention down to only these ve points. Here is the PPC curve that I have put together for you: where the horizontal axis is calibrated in terms of millions of lives saved, and the vertical axis is calibrated in the terms of millions of jobs saved. This trade-off is indeed the main reason why the decision as to \"when to reopen the economy\" has become a hard decision for the US government/states (whichever has the power to do that) to make, because the health advisors (whose objective function is primarily to maximize the number of saved lives, put simply) are asking to extend the lockdown period to \"save lives\b) d) How much is the highest total monetarized benet that the point you have identied in Part \"a\" brings about for the economy? (2 pts) Now, suppose that the average value of a human life is just $500,000 and the value of a saved job is equal to $120,000. New using this context, fmd the best combination of YL and Y; among the 5 points shown on the curve and report your results below and make sure to put the units of each of the optimal values of YL and Y]. That is, which of the ve points brings about the highest total monetarized benet for the economy among the five points under study if we take these new values of lives and jobs as described above? (6 pts) How much is the highest total monetarized benet that the point you have identied in Part \"c\" brings about for the economy? Compute this highest total monetarized benet that this rational decision to be made by the government can bring about for the society/economy as a whole and report it below. (2 pts) In your opinion, how can the government/society make the schedule of the trade-off (i.e. the possibilities frontier) shift outward and to the right and up, enabling the economy/society to achieve a higher combination of both lives saved and jobs saved simultaneously? What actions/policies need to be taken/implemented? (2 P15) In your opinion, how can this life-economy trade-offbe eliminated entirely? What do we need to achieve this end? (2 pts) variables), we need to rst put a price on each life. Then, this model can be used to answer the question of \"by how many percent should the economy be partially open to maximize the overall monetary benet to the society?\" In theory and from an ethical point of view, a human life is priceless. However, in reality and from a practical/policy point of view, a human life can and should be priced, and such a valuation has become routine in Americans' daily lives nowadays. When legislators and regulators enact new rules and when government ofcials propose policies, they all need to weigh the costs and benets associated with their decisions. One of the main questions that arises around the Coronavirus trade-off is how to place a monetary value on a human life in economic terms. Only once we have done so, we can do a cost-benet analysis to answer how many jobs we should be willing to sacrice to save a person from dying. There are different methodologies to estimate and different estimates made for the value of a human life. For example, we know that the US government pays a $500,000 monetary death benet to families when a soldier is killed in Iraq or Afghanistan. Additionally, behavioral economists, actuarial economists working for insurance companies, as well as environmental economists have estimated other values for a human life, which mostly are far larger than the amount paid by the US government for the soldiers killed in war zones.2 In this question, we assume the average value of a human life to be $1,000,000. We also assume that the value of a saved job is equal to its annual compensation, and we assume it to be $60,000, we just look at one-period (annual) benet of a job saved, assuming that if the job is lost this year in the economy, it can be recovered back in the economy in the next period/year (but inherent in our estimate of the value of life is the long-run cost of losing a human life).3 Hence, one consideration that we have taken into account in our estimates when framing this problem is that a job loss is a temporary loss while a life loss is a permanent loss. Now after putting a price on a human life, we can go ahead and set up an objective function for the Coronavirus trade- o'. Suppose that PL denotes the value of a human life, PJ denotes the value of a saved job, YL denotes the number of lives saved, Y; denotes the number of jobs saved, and Y denotes the total monetarized benet of the trade-off choice made for the society/economy as a whole. Please follow this information, framework, and estimates to answer the following questions. a) Consider the ve particular combinations shown on the curve (the points numbered (1), (2), (3), (4), and (5)). Among these ve combinations, which point is the best combination for the economy to operate on? That is, which of these ve points brings about the highest total monetarized benet for the economy among the ve points under study? (6 pts) 2. The Value of a human life has been estimated to be $9.1 million by Environmental Protection Agency in 2010, and $7.9 million by Food and Drug Administration in 2010, and $9.2 million by the Department of Transportation, 2014, and $9.6 million by the Department of Transportation in 2016. To see more information on these, you can see the following pages on the Internet: httpszcontentlime.comftimefhealthfartielcfllBS99.1803049,00.html httpsfwwwtheglobalistcomfthe-cost-ofahumanlifestatistically-speaking https:.v'fen.wikipedia.org/wikWalue of life 3. Here, we are trying to simplify matters by making several simplifying assumptions, since our purpose here is to put together a workable problem. In the real world, modeling such a tradeoff would involve many other subtleties and complexities such as its dynamic aspects, which all need to be taken into account when making a decision about the optimal degree of the partial operation of the economy and when nding the best combination of saved jobs and saved lives, whose discussion is beyond the scope of this question now