Final answer:
The economic cost to society each year from crashes and injuries can be calculated by considering the total damage incurred by car accidents. In the given example, a group of 100 drivers is divided into three groups based on the magnitude of accidents and the corresponding costs. The insurance company can collect the required amount by charging each driver a premium determined by dividing the total damage by the number of drivers.
Step-by-step explanation:
The economic cost to society each year from crashes and injuries can be calculated based on the total damage incurred by car accidents. In the given example, a group of 100 drivers is divided into three groups: 60 drivers with minor damages costing $100 each, 30 drivers with medium-sized accidents costing an average of $1,000 in damages, and 10 drivers with large accidents costing $15,000 in damages. The total damage incurred by car accidents in this group is $186,000.
If each of the 100 drivers pays a $1,860 premium each year, the insurance company will collect the $186,000 needed to cover the costs of the accidents that occur. This premium amount is calculated by dividing the total damage by the number of drivers, resulting in a per-driver premium of $1,860. This premium is then multiplied by the number of drivers to collect the required amount.