Pesticides and the price of food

Suppose the government is considering allowing a new pesticide to enter the market. The pesticide lowers the cost of growing crops. However, small quantities of it remain on the food and there is evidence that it is carcinogenic. No epidemiological studies have been done but in a clinical study a dose of 1000 units of the chemical were shown to cause 10 fatal cases of cancer in a population of 200 rats.

1. Suppose that one year’s of use of the pesticide by farmers would expose a typical consumer to 1 unit of the chemical and would lower the consumer’s food expenses by $5. Under the usual assumptions used in risk assessment, should the government allow the pesticide to be used? Discuss how your decision would be affected by the population’s willingness to pay per life saved and give an indication of the real world range of WTP for a life.
2. Now suppose that a new clinical trial has been done and which finds that the true dose-response function has the form: R = (D^0.5)/632, where D is the dose (the number of units of the pesticide to which a person has been exposed) and R is the increase in the risk of developing cancer. Does this change your answer to part (1)? Discuss.