Two alternative programs to save 50 more lives per year entail providing more cardiac intensive care facilities and redesigning dangerous highway interchanges. The price of a new cardiac intensive care unit is $500,000, and the price of redesigning and renovating a highway interchange is $1 million. One combination of the two programs that can save 500 lives is five cardiac units and three highway exit renovations.
If five cardiac units are built, the marginal product of this program will be 10 lives saved per year. If three highway interchanges are redesigned, the marginal product of this program also will be 10 lives saved per year. Is the mix involving five cardiac units and three highway exit renovations cost effective? Assuming that the marginal products of both programs decline, what needs to be done to achieve the cost-effective mix of programs?