1. What are the extra costs associated with driving with headlights on during the day? 2. What are the benefits associated with driving with headlights on during the day? 3. What additional assumptions (if any) are needed to complete the analysis? 4. Is it cost effective to drive with headlights on during the day?
CASE STUDY: The Economic Daytime Running Light
The use of Daytime Running Lights (DRLs) has increased in popularity with car designers
throughout the world. In some countries, motorists are required to drive with their
headlights on at all times. U.S. car manufacturers now offer models equipped with
daytime running lights. Most people would agree that driving with the headlights on at
night is cost effective with respect to extra fuel consumption and safety considerations
(not to mention required by law!). Cost effective means that benefits outweigh
(exceed) the costs. However, some consumers have questioned whether it is cost
effective to drive with your headlights on during the day. In an attempt to provide an
answer to this question, let us consider the following suggested data:
75% of driving takes place during the daytime.
2% of fuel consumption is due to accessories (radio, headlights, etc.).
Cost of fuel = $4.00 per gallon.
Average distance traveled per year = 15,000 miles.
Average cost of an accident = $2,800.
Purchase price of headlights = $25.00 per set (2 headlights).
Average time car is in operation per year = 350 hours.
Average life of a headlight = 200 operating hours.
Average fuel consumption = 1 gallon per 30 miles.
Answer the following set of questions:
1. What are the extra costs associated with driving with headlights on during
the day?
2. What are the benefits associated with driving with headlights on during the day?
3. What additional assumptions (if any) are needed to complete the analysis?
4. Is it cost effective to drive with headlights on during the day?
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