You have been hired by the government of Oklahoma to conduct a cost-benefit analysis of saferooms in permanent homes in Oklahoma City.After much research, you collect the following data:

Annualized cost of a saferoom (assuming

a 50-yr useful life of a shelter and

discount factor of 3%)...$115

Number of permanent homes...747,757

Average annual tornado fatalities...6.76 people

Average annual injuries...77.9 people

Proportion of fatalities in permanent homes ...31.1%

Proportion of injuries in permanent homes...31.1%

Assume that all permanent homes will need to be equipped with saferooms and that saferooms will prevent all fatalities and injuries in permanent homes.Based on this information, you make the following calculations:

1. You estimate that without saferooms, annual fatalities in permanent homes will be __________ people.

2. You estimate that with saferooms, the annual cost-per-fatality avoided in permanent homes will be $_______________ million.

3. To evaluate whether fatalities prevented are sufficient to justify purchase of saferooms by residents of permanent homes you require a figure for the monetary value of a statistical life.For this value you reference labour market studies and find that jobs with a 1/1000 greater chance of fatal injury in a year have a wage premium of $5000 per year.From this data you calculate the implicit value of a statistical life to be $___________ million.

Results of your cost-benefit analysis of saferooms indicate that fatalities prevented are not

sufficient to justify purchase of saferooms by residents of permanent homes.Values for injuries

prevented would need to be added to the value of lives saved for a complete cost-benefit

analysis, so you do some further calculations:

4. You estimate annual injuries in permanent homes to be __________ people.

5. Referencing labour market studies you find that jobs with a 1/100 greater chance of non-fatal injury in a year offer a wage premium of $500 per year.From this data you find the estimate for the value of a statistical injury, and using this estimate you convert the annual injuries in permanent homes into ___________ annual fatality equivalents.

6.Adding injuries in fatality equivalents to your earlier estimates of fatalities avoided in permanent homes, you recalculate the annual cost-per-fatality avoided in permanent homes to be $ ____________ million.

7. With your complete cost-benefit analysis at hand, you conclude that fatalities plus injuries prevented are (sufficient/insufficient) ____________ to justify purchase of saferooms by residents of permanent homes.

8. With your complete cost-benefit analysis at hand, you conclude that non-purchase of

saferooms by residents of permanent homes (is/is not) ______________ indicative of market

failure.