# Probability of Loss

Find the optimal level of safety (probability of an accident) from a societal perspective using the data on the costs of safety given in the table below. Assume that an accident imposes costs on a victim equal to $500,000.

Probability Safety

of Loss Expenditures

0.030 $ 0

0.020 1,000

0.015 2,000

0.012 3,000

0.0095 4,000

0.009 5,000

https://brainmass.com/business/business-math/probability-loss-356583

#### Solution Preview

There are two costs that impact this calculation: the expected cost to the victim and the safety expenditures. The expected cost to the victim is calculated based on the ...

#### Solution Summary

This solution calculates the optimal level of safety expenditures given the probability of loss.

$2.19