Suppose you are trying to calculate the value of a statistical life. You observe two apartment complexes that are identical except that one is slightly closer to an industrial plant that is releasing toxic pollution that increases the risk of death by 1 in 60,000. In other words, the risk of death at Apartment A (the closer apartment) is higher than the risk of death at Apartment Z by 1/60,000. You observe that rent is $1,000 per month at Apartment A and $1,600 per month at Apartment Z.

a)Calculate the value of a statistical life implied by these figures.

b)What are the problems with estimating the value of a statistical life using the differences in rent and differences in the probability of death?

c)How does your estimate of the value of a statistical life compare to estimates discussed in class?