Solution Manual For Managerial Economics, 9th Edition William F.
Samuelson, Stephen G. Marks, Jay L. Zagorsky
AnswersTtoTB
ack-of-Chapter
Problems
ChapterT1
1. ManagerialTeconomicsTisTtheTanalysisTofTimportantTmanagementTdecisionsTusingTt
heTtoolsTofTeconomics.TMostTbusinessTdecisionsTareTmotivatedTbyTtheTgoalTofTmax
imizingTtheTfirm‟sTprofit.TTheTtoolsTofTmanagerialTeconomicsTprovideTaTguideTtoT
profit-TmaximizingTdecisions.
2. i)TMultinationalTProductionTandTPricing.TTheTglobalTautomobileTcompanyTneedsT
informationTonT1)TdemandT(howTmanyTvehiclesTcanTbeTsoldTinTeachTmarketTatTdif
ferentTprices),T2)TplantTcapacitiesTandTproductionTcosts,TandT3)TtradeTbarriersTandT
tariffs.
ii) MarketTEntry.T RememberTthatTUberTbeganTasTaTridesharingTidea,TbeforeTultimatel
yTbecomingTaTmarketTdisruptorTwithTrespectTtoTtheTlongTestablishedTtaxicabTindustr
y.TCrucialTnecessaryTinformationTandTquestionsTinclude:TWouldTcityTregulatorsTallo
wTUberTtoToperateTatTall?TWhatTmarketTnicheT(howTmuchTdemand)TcouldTitTcarveT
outTofTtheTtaxiTandTcarTserviceTmarkets?TAtTwhatTpricesTrelativeTtoTtaxis?TWouldTc
ustomersTtrustTaTrideshareTservice?THowTmanyTdriversTcouldTrideshareTfirmsTattract
TandTatTwhatTcosts?
iii) BuildingT aTNewTBridge.T TheTauthorityTshouldTestimateTusageTofTtheTbridgeTove
rTitsTusefulTlife,TtheTlikelyTcostTofTbuildingTandTmaintainingTtheTbridge,TandTother
TimportantTside-effects,TproTandTconT--
TincludingTpositiveTeffectsTonTbusinessTactivityTandTtheTimpactsTonTairTpollutionTa
ndTtrafficTcongestion.
iv) AT RegulatoryTProblem.T BeforeTdecidingTwhetherTtoTpromoteTtheToil-to-
coalTconversion,TgovernmentTregulatorsTneedTinformationTonThowTmuchToilTwouldT
beTsavedT(andTtheTdollarTvalueTofTsavings)TandTtheTcostTofTtheTchainTofTside-
effectsT--
, TnotTonlyTtheTdirectTcostTofTelectricityTprovisionTbutTalsoTpollutionTcostsTandTenvir
onmentalTdamage.
v) BoeingTandTtheT737TMax.T BoeingTgatheredTextensiveTinformationTonTpotentialTairli
neTdemandTforTaTnewTmoreTfuel-
efficientTaircraft,TyetTconsiderableTuncertaintyTremainedTwithTrespectTtoTfutureTorders
.TWouldTtheTnewTaircraftTshiftTsignificantTordersTandTsalesTfromTAirbus,TBoeing‟sTlo
ngtimeTrival?TCouldTBoeingTachieveTitsTaggressiveTR&DTandTproductionTplanTonTbu
dgetTandTonTschedule?TCouldTitTaddressTandTsolveTmyriadTreliabilityTandTsafetyTprob
lems,TbigTandTsmall?THowTsevereTwouldTbeTongoingTregulatoryToversightTandThowT
highTaTbarTwouldTtheTFAATsetTforTcertificationTrequirements?TFiveTorTtenTyearsTfro
mTnow,TwouldTtheTworldTeconomyTcontinueTtoTgrow,TfuelingTstrongTdemandTforTairT
travelTandTforTtheTnewTandTimprovedTaircraft?
vi) AnTR&DTDecision.T TheTpharmaceuticalTcompanyTshouldTquizTitsTscientistsTonTthe
TchancesTofTsuccessT(andTtheTtimetableTforTcompletion)TforTeachTR&DTapproach.T T
heTcompany'sTmarketingTdepartmentTwouldTsupplyTestimatesTofTpossibleTrevenuesTfr
omTtheTdrug;TitsTproductionTdepartmentTwouldTestimateTpossibleTcosts.
vii) DavidTLetterman.T DaveTmustTcarefullyTassessTwhatTheTwantsTfromTaTnewTcontract
T(inTparticularThowTmuchTheTvaluesTtheTearlierTtimeTslot).TAsTtheTnegotiationsTunfol
d,TDaveTwillTgleanTvaluableTinformationTasTtoTtheTcurrentTcompetingToffersTofTCBS
TandTNBC.TOfTcourse,TDaveTmustTalsoTtryTtoTassessThowTfarTtheTtwoTnetworksTmig
htTbeTwillingTtoTgoTinTsweeteningTtheirToffers.
3. TheTsixTstepsTmightTleadTtheTsoft-
drinkTfirmTtoTconsiderTtheTfollowingTquestions.TStepT1:TWhatTisTtheTcontext?TIsTthis
TtheTfirm‟sTfirstTsuchTsoftTdrink?TWillTitTbeTfirstTtoTtheTmarketplace,TorTisTitTimitati
ngTaTcompetitor?TStepT2:TWhatTisTtheTprofitTpotentialTforTsuchTaTdrink?TWouldTtheT
drinkTachieveTotherTobjectives?TIsTtheTfruitTdrinkTcomplementaryTtoTtheTfirm‟sTother
Tproducts?TWouldTitTenhanceTtheTfirm‟sTimage?TStepT3:TWhichTofTsixTversionsTofTt
heTdrinkTshouldTtheTfirmTintroduce?TWhenT(nowTorTlater)TandTwhereT(regionally,Tnat
ionally,TorTinternationally)TshouldTitTintroduceTtheTdrink?TWhatTisTanTappropriateTad
vertisingTandTpromotionTpolicy?TStepT4:TWhatTareTtheTfirm‟sTprofitTforecastsTforTthe
TdrinkTinTitsTfirst,Tsecond,TandTthirdTyears?TWhatTareTtheTchancesTthatTtheTdrinkTwill
TbeTaTfailureTafterT15Tmonths?TShouldTtheTfirmTtestTmarketTtheTdrinkTbeforeTlaunchi
ngTit?TStepT5:TBasedTonTtheTanswersTtoTtheTquestionsTinTStepsT1TthroughT4,TwhatTisT
theTfirm‟sTmostTprofitableTcourseTofTaction?TStepT6:TInTlightTofTexpectedT(orTunexpe
cted)TdevelopmentsTinTtheTfirstTyearTofTtheTlaunch,ThowTshouldTtheTfirmTmodifyTitsT
, courseTofTaction?
4. DecisionTvignettes
a. ATcoupleTwhoTbuyTtheTfirstThouseTtheyTviewThaveTprobablyTsampledTtooTfewThouses
.THousingTmarketsTareTnotoriouslyTimperfect.T HousesTcomeTinTvariousTshapes,Tsizes,
Tconditions,Tneighborhoods,TandTprices.T PersonalTpreferencesTforThousesTalsoTvaryTe
normously.T TheTcoupleTisTlikelyTtoTgetTaT"better"ThouseTforTthemselvesTifTtheyTview
TaTdozen,TtwoTdozen,TorTmoreThousesToverTtheTcourseTofTtimeTbeforeTbuyingTtheirT"
most-Tpreferred"ThouseTfromTtheTlot.TCircumstancesTjustifyingTtheTfirst-
houseTpurchaseTinclude:
(1)TtheThouseTisTsoTgoodTthatTviewingTothersTisTaTwasteTofTtime,T(2)TtheThouseTisTso
TgoodTandTtheTcommitmentTmustTbeTmadeTnowTorTanotherTbuyerTwillTclaimTtheThou
se,T(3)TtheTcoupleTmustTbuyTnowT(aTjobTtransferThasTbroughtTthemTtoTtheTareaTandTs
choolsTopenTtomorrow),T(4)TtheyTalreadyThaveTfullTinformationTaboutTtheTtypesTofTot
herThousesTavailableT(theTwife'sTbestTfriendTisTaTrealTestateTagent).
b. TheTcompanyTseemsTtoTbeTlaunchingTtheTproductTtoTavoidT“wasting”TtheT$6TmillionT
alreadyTspentTinTdevelopment.T ThisT"sunk"TcostTisTirrelevantTandTshouldTbeTignored.
TWhatTdoesTmatterTforTtheTreinvestmentTdecisionTareTtheTfutureTrevenuesTandTcostsTo
fTcontinuing.T (ReinvestTifTtheTnetTpresentTvalueTofTfutureTprofitsTisTpositive.)T SomeT
"close-Tto-
home"TexamplesTofTtheTsunkTcostTfallacy:Ti)TATfellowTpaysT$250TforTaTyear-
longTtennisTmembershipTbutTdevelopsTsevereTtennisTelbowTafterTtwoTmonths.T HeTcon
tinuesTtoTplayTinTgreatTpainTinTorderTtoTgetThisTmoney'sTworth.Tii)TMs.TKThasTaTsubs
criptionTtoTaTseriesTofT sixTplaysTforT$150.T SheTbravesTaTsnowTstormTsoTasTnotTtoTw
asteTtheT$25Tcost.T OnTreflection,TsheTadmitsTthatTsheTwouldn'tThaveTgoneThadTsheTb
eenTgivenTtheTticketTforTfree.
c. It'sTinTtheTindividualTmotorist'sTbestTinterestTtoTdriveTon.T (StoppingTisTriskyTandTinc
onvenient).T ButTit'sTinTtheTcollectiveTinterestTofTallTtheTdelayedTmotoristsTtoThaveTso
meoneTstopTandTmoveTtheTmattress.T Here'sTanTexampleTofTtheTpotentialTconflictTbet
weenTprivateTandTpublicTinterestsT(betweenTprivateTprofitTandTsocialTwelfare).T InTsuc
hTcircumstances,TthereTisTaTpotentialTroleTforTgovernmentTintervention.
d. AllowingTtheTuseTofTthalidomideThadTaTdisastrousToutcomeTandTmoreTimportantlyT
wasTaTbadTdecisionT(besidesTitsTpotentialTrisk,TtheTdrugTwasTofTquestionableTbenefi
tTinTaidingTsleep).T TheTthalidomideTdisasterTpromptedTaTmuchTtougherTstanceTtowa
rdTpriorTdrugTtestingTinTtheTU.S.TandTelsewhere.
, e. TheTfranticTcoupleTshouldTchooseTseparateTlinesTtoTtakeTadvantageTofTwhicheverTli
neTisTquicker.T WhoeverTgetsTservedTfirstTshouldTcheckTtheTbaggage.T TheTlessonT
here:TDIVERSIFY.
f. ToTtheTextentTthatThisTactionsTandTbehaviorTwereTresponsibleTforThisTmarriageTbre
akup,TtheTCEO‟sTmistakeTwasTtoTloseTsightTofTtheTmostTimportantTobjective.
g. TheTcostTperTlifeTsavedTisT$400,000/20T=T$20,000TforTtheTambulanceTservice.T ItTis
$1,200,000/40T=T$30,000TforTtheThighwayTprogram.T BasedTonTtheseTaverageTmeasur
es,TitsTseemsTstrangeTthatTtheTambulanceTbudgetTisTbeingTcutTandTtheThighwayTbudg
etTexpanded.T However,TtheTrealTissueTisTtheTimpactTonTlivesTsavedTfromTbudgetTcha
ngesTatTtheTmargin.T Perhaps,TtheTambulanceTbudgetThasTaTlotTofTadministrativeT"fat"
TinTit.T ItTcouldTbeTcutTbyT40%TwithTveryTlittleTimpactTonTlives.T ByTtheTsameTtoken,
TaTmodestTbudgetTincreaseTforThighwaysTmightThaveTaTlargeTimpactTonTadditionalTli
vesTsaved.T InTshort,TtheTaverageTcostTperTlifeTmayTnotTtellTtheTrealTstory.
h. FEMA‟sTpredictionTofTtheTpotentialThurricaneTriskTtoTNewTOrleansTwasTtimelyTandT
prescient.THowever,TtheTwarningTwasTnotTemphasizedTbyTtheTagencyTandTcertainlyTn
otTheededTbyTfederal,Tstate,TorTlocalTpolicyTmakers.TTheTdecisionTerrorTwasTaTcombin
ationTofTinattention,TwishfulTthinking,TandTdenial.
i. ComparedTtoTtheseTextremeToutcomesT(abjectTsurrenderTtoTterrorismTorTbeingTaTgl
obalTpoliceman)TanyToptionTlooksTgood.T ThisTisThardlyTanTeven-
handedTportrayal.TTheTrealTquestionTisTwhetherTimplementingTincreasedTsecurityT
measuresTthatTsacrificeTcivilTlibertiesTisTbetterTthanTnumerousTotherTrelevantTalter
natives.
j. AccordingTtoTtheTcountsTofTprosTandTcons,TtheTindividualTprefers:THomeToverTBeach,
TBeachToverTMountains,TbutTMountainsToverTHome.TWeThaveTaTcycleT(i.e.Tintransitiv
eTpreferences).T TheTindividualTisTleftTgoingTaroundTinTcircles.TTheTobviousTwayToutT
ofTthisTdilemmaTisTtoT"score"TeachTalternativeTbyTweightingTtheTindividualTattributes.
T TheTmoreTimportantTtheTattribute,TthenTtheTgreaterTisTtheTweight.TInTaddition,TtheTin
dividualTcouldTuseTaTbroaderTscaleT(1TtoT10)TforTeachTattributeTasTaTwayTofTmeasurin
gTrelativeTstrengthTofTpreferencesTbetweenTalternatives.T (ForTaTrelatedTexample,TseeT
ProblemT4.2TinTChapterT4.)
Samuelson, Stephen G. Marks, Jay L. Zagorsky
AnswersTtoTB
ack-of-Chapter
Problems
ChapterT1
1. ManagerialTeconomicsTisTtheTanalysisTofTimportantTmanagementTdecisionsTusingTt
heTtoolsTofTeconomics.TMostTbusinessTdecisionsTareTmotivatedTbyTtheTgoalTofTmax
imizingTtheTfirm‟sTprofit.TTheTtoolsTofTmanagerialTeconomicsTprovideTaTguideTtoT
profit-TmaximizingTdecisions.
2. i)TMultinationalTProductionTandTPricing.TTheTglobalTautomobileTcompanyTneedsT
informationTonT1)TdemandT(howTmanyTvehiclesTcanTbeTsoldTinTeachTmarketTatTdif
ferentTprices),T2)TplantTcapacitiesTandTproductionTcosts,TandT3)TtradeTbarriersTandT
tariffs.
ii) MarketTEntry.T RememberTthatTUberTbeganTasTaTridesharingTidea,TbeforeTultimatel
yTbecomingTaTmarketTdisruptorTwithTrespectTtoTtheTlongTestablishedTtaxicabTindustr
y.TCrucialTnecessaryTinformationTandTquestionsTinclude:TWouldTcityTregulatorsTallo
wTUberTtoToperateTatTall?TWhatTmarketTnicheT(howTmuchTdemand)TcouldTitTcarveT
outTofTtheTtaxiTandTcarTserviceTmarkets?TAtTwhatTpricesTrelativeTtoTtaxis?TWouldTc
ustomersTtrustTaTrideshareTservice?THowTmanyTdriversTcouldTrideshareTfirmsTattract
TandTatTwhatTcosts?
iii) BuildingT aTNewTBridge.T TheTauthorityTshouldTestimateTusageTofTtheTbridgeTove
rTitsTusefulTlife,TtheTlikelyTcostTofTbuildingTandTmaintainingTtheTbridge,TandTother
TimportantTside-effects,TproTandTconT--
TincludingTpositiveTeffectsTonTbusinessTactivityTandTtheTimpactsTonTairTpollutionTa
ndTtrafficTcongestion.
iv) AT RegulatoryTProblem.T BeforeTdecidingTwhetherTtoTpromoteTtheToil-to-
coalTconversion,TgovernmentTregulatorsTneedTinformationTonThowTmuchToilTwouldT
beTsavedT(andTtheTdollarTvalueTofTsavings)TandTtheTcostTofTtheTchainTofTside-
effectsT--
, TnotTonlyTtheTdirectTcostTofTelectricityTprovisionTbutTalsoTpollutionTcostsTandTenvir
onmentalTdamage.
v) BoeingTandTtheT737TMax.T BoeingTgatheredTextensiveTinformationTonTpotentialTairli
neTdemandTforTaTnewTmoreTfuel-
efficientTaircraft,TyetTconsiderableTuncertaintyTremainedTwithTrespectTtoTfutureTorders
.TWouldTtheTnewTaircraftTshiftTsignificantTordersTandTsalesTfromTAirbus,TBoeing‟sTlo
ngtimeTrival?TCouldTBoeingTachieveTitsTaggressiveTR&DTandTproductionTplanTonTbu
dgetTandTonTschedule?TCouldTitTaddressTandTsolveTmyriadTreliabilityTandTsafetyTprob
lems,TbigTandTsmall?THowTsevereTwouldTbeTongoingTregulatoryToversightTandThowT
highTaTbarTwouldTtheTFAATsetTforTcertificationTrequirements?TFiveTorTtenTyearsTfro
mTnow,TwouldTtheTworldTeconomyTcontinueTtoTgrow,TfuelingTstrongTdemandTforTairT
travelTandTforTtheTnewTandTimprovedTaircraft?
vi) AnTR&DTDecision.T TheTpharmaceuticalTcompanyTshouldTquizTitsTscientistsTonTthe
TchancesTofTsuccessT(andTtheTtimetableTforTcompletion)TforTeachTR&DTapproach.T T
heTcompany'sTmarketingTdepartmentTwouldTsupplyTestimatesTofTpossibleTrevenuesTfr
omTtheTdrug;TitsTproductionTdepartmentTwouldTestimateTpossibleTcosts.
vii) DavidTLetterman.T DaveTmustTcarefullyTassessTwhatTheTwantsTfromTaTnewTcontract
T(inTparticularThowTmuchTheTvaluesTtheTearlierTtimeTslot).TAsTtheTnegotiationsTunfol
d,TDaveTwillTgleanTvaluableTinformationTasTtoTtheTcurrentTcompetingToffersTofTCBS
TandTNBC.TOfTcourse,TDaveTmustTalsoTtryTtoTassessThowTfarTtheTtwoTnetworksTmig
htTbeTwillingTtoTgoTinTsweeteningTtheirToffers.
3. TheTsixTstepsTmightTleadTtheTsoft-
drinkTfirmTtoTconsiderTtheTfollowingTquestions.TStepT1:TWhatTisTtheTcontext?TIsTthis
TtheTfirm‟sTfirstTsuchTsoftTdrink?TWillTitTbeTfirstTtoTtheTmarketplace,TorTisTitTimitati
ngTaTcompetitor?TStepT2:TWhatTisTtheTprofitTpotentialTforTsuchTaTdrink?TWouldTtheT
drinkTachieveTotherTobjectives?TIsTtheTfruitTdrinkTcomplementaryTtoTtheTfirm‟sTother
Tproducts?TWouldTitTenhanceTtheTfirm‟sTimage?TStepT3:TWhichTofTsixTversionsTofTt
heTdrinkTshouldTtheTfirmTintroduce?TWhenT(nowTorTlater)TandTwhereT(regionally,Tnat
ionally,TorTinternationally)TshouldTitTintroduceTtheTdrink?TWhatTisTanTappropriateTad
vertisingTandTpromotionTpolicy?TStepT4:TWhatTareTtheTfirm‟sTprofitTforecastsTforTthe
TdrinkTinTitsTfirst,Tsecond,TandTthirdTyears?TWhatTareTtheTchancesTthatTtheTdrinkTwill
TbeTaTfailureTafterT15Tmonths?TShouldTtheTfirmTtestTmarketTtheTdrinkTbeforeTlaunchi
ngTit?TStepT5:TBasedTonTtheTanswersTtoTtheTquestionsTinTStepsT1TthroughT4,TwhatTisT
theTfirm‟sTmostTprofitableTcourseTofTaction?TStepT6:TInTlightTofTexpectedT(orTunexpe
cted)TdevelopmentsTinTtheTfirstTyearTofTtheTlaunch,ThowTshouldTtheTfirmTmodifyTitsT
, courseTofTaction?
4. DecisionTvignettes
a. ATcoupleTwhoTbuyTtheTfirstThouseTtheyTviewThaveTprobablyTsampledTtooTfewThouses
.THousingTmarketsTareTnotoriouslyTimperfect.T HousesTcomeTinTvariousTshapes,Tsizes,
Tconditions,Tneighborhoods,TandTprices.T PersonalTpreferencesTforThousesTalsoTvaryTe
normously.T TheTcoupleTisTlikelyTtoTgetTaT"better"ThouseTforTthemselvesTifTtheyTview
TaTdozen,TtwoTdozen,TorTmoreThousesToverTtheTcourseTofTtimeTbeforeTbuyingTtheirT"
most-Tpreferred"ThouseTfromTtheTlot.TCircumstancesTjustifyingTtheTfirst-
houseTpurchaseTinclude:
(1)TtheThouseTisTsoTgoodTthatTviewingTothersTisTaTwasteTofTtime,T(2)TtheThouseTisTso
TgoodTandTtheTcommitmentTmustTbeTmadeTnowTorTanotherTbuyerTwillTclaimTtheThou
se,T(3)TtheTcoupleTmustTbuyTnowT(aTjobTtransferThasTbroughtTthemTtoTtheTareaTandTs
choolsTopenTtomorrow),T(4)TtheyTalreadyThaveTfullTinformationTaboutTtheTtypesTofTot
herThousesTavailableT(theTwife'sTbestTfriendTisTaTrealTestateTagent).
b. TheTcompanyTseemsTtoTbeTlaunchingTtheTproductTtoTavoidT“wasting”TtheT$6TmillionT
alreadyTspentTinTdevelopment.T ThisT"sunk"TcostTisTirrelevantTandTshouldTbeTignored.
TWhatTdoesTmatterTforTtheTreinvestmentTdecisionTareTtheTfutureTrevenuesTandTcostsTo
fTcontinuing.T (ReinvestTifTtheTnetTpresentTvalueTofTfutureTprofitsTisTpositive.)T SomeT
"close-Tto-
home"TexamplesTofTtheTsunkTcostTfallacy:Ti)TATfellowTpaysT$250TforTaTyear-
longTtennisTmembershipTbutTdevelopsTsevereTtennisTelbowTafterTtwoTmonths.T HeTcon
tinuesTtoTplayTinTgreatTpainTinTorderTtoTgetThisTmoney'sTworth.Tii)TMs.TKThasTaTsubs
criptionTtoTaTseriesTofT sixTplaysTforT$150.T SheTbravesTaTsnowTstormTsoTasTnotTtoTw
asteTtheT$25Tcost.T OnTreflection,TsheTadmitsTthatTsheTwouldn'tThaveTgoneThadTsheTb
eenTgivenTtheTticketTforTfree.
c. It'sTinTtheTindividualTmotorist'sTbestTinterestTtoTdriveTon.T (StoppingTisTriskyTandTinc
onvenient).T ButTit'sTinTtheTcollectiveTinterestTofTallTtheTdelayedTmotoristsTtoThaveTso
meoneTstopTandTmoveTtheTmattress.T Here'sTanTexampleTofTtheTpotentialTconflictTbet
weenTprivateTandTpublicTinterestsT(betweenTprivateTprofitTandTsocialTwelfare).T InTsuc
hTcircumstances,TthereTisTaTpotentialTroleTforTgovernmentTintervention.
d. AllowingTtheTuseTofTthalidomideThadTaTdisastrousToutcomeTandTmoreTimportantlyT
wasTaTbadTdecisionT(besidesTitsTpotentialTrisk,TtheTdrugTwasTofTquestionableTbenefi
tTinTaidingTsleep).T TheTthalidomideTdisasterTpromptedTaTmuchTtougherTstanceTtowa
rdTpriorTdrugTtestingTinTtheTU.S.TandTelsewhere.
, e. TheTfranticTcoupleTshouldTchooseTseparateTlinesTtoTtakeTadvantageTofTwhicheverTli
neTisTquicker.T WhoeverTgetsTservedTfirstTshouldTcheckTtheTbaggage.T TheTlessonT
here:TDIVERSIFY.
f. ToTtheTextentTthatThisTactionsTandTbehaviorTwereTresponsibleTforThisTmarriageTbre
akup,TtheTCEO‟sTmistakeTwasTtoTloseTsightTofTtheTmostTimportantTobjective.
g. TheTcostTperTlifeTsavedTisT$400,000/20T=T$20,000TforTtheTambulanceTservice.T ItTis
$1,200,000/40T=T$30,000TforTtheThighwayTprogram.T BasedTonTtheseTaverageTmeasur
es,TitsTseemsTstrangeTthatTtheTambulanceTbudgetTisTbeingTcutTandTtheThighwayTbudg
etTexpanded.T However,TtheTrealTissueTisTtheTimpactTonTlivesTsavedTfromTbudgetTcha
ngesTatTtheTmargin.T Perhaps,TtheTambulanceTbudgetThasTaTlotTofTadministrativeT"fat"
TinTit.T ItTcouldTbeTcutTbyT40%TwithTveryTlittleTimpactTonTlives.T ByTtheTsameTtoken,
TaTmodestTbudgetTincreaseTforThighwaysTmightThaveTaTlargeTimpactTonTadditionalTli
vesTsaved.T InTshort,TtheTaverageTcostTperTlifeTmayTnotTtellTtheTrealTstory.
h. FEMA‟sTpredictionTofTtheTpotentialThurricaneTriskTtoTNewTOrleansTwasTtimelyTandT
prescient.THowever,TtheTwarningTwasTnotTemphasizedTbyTtheTagencyTandTcertainlyTn
otTheededTbyTfederal,Tstate,TorTlocalTpolicyTmakers.TTheTdecisionTerrorTwasTaTcombin
ationTofTinattention,TwishfulTthinking,TandTdenial.
i. ComparedTtoTtheseTextremeToutcomesT(abjectTsurrenderTtoTterrorismTorTbeingTaTgl
obalTpoliceman)TanyToptionTlooksTgood.T ThisTisThardlyTanTeven-
handedTportrayal.TTheTrealTquestionTisTwhetherTimplementingTincreasedTsecurityT
measuresTthatTsacrificeTcivilTlibertiesTisTbetterTthanTnumerousTotherTrelevantTalter
natives.
j. AccordingTtoTtheTcountsTofTprosTandTcons,TtheTindividualTprefers:THomeToverTBeach,
TBeachToverTMountains,TbutTMountainsToverTHome.TWeThaveTaTcycleT(i.e.Tintransitiv
eTpreferences).T TheTindividualTisTleftTgoingTaroundTinTcircles.TTheTobviousTwayToutT
ofTthisTdilemmaTisTtoT"score"TeachTalternativeTbyTweightingTtheTindividualTattributes.
T TheTmoreTimportantTtheTattribute,TthenTtheTgreaterTisTtheTweight.TInTaddition,TtheTin
dividualTcouldTuseTaTbroaderTscaleT(1TtoT10)TforTeachTattributeTasTaTwayTofTmeasurin
gTrelativeTstrengthTofTpreferencesTbetweenTalternatives.T (ForTaTrelatedTexample,TseeT
ProblemT4.2TinTChapterT4.)
