Gce Model Questions Vol1 2021 Geography Question 50

A coastal town faces two environmental hazards.\n\n• Storm‑surge flooding: annual probability of a surge >2 m is 0.04; if it occurs the expected economic loss is £12 million (SD £3 million).\n• Industrial chemical spill: annual probability of a major spill is 0.02; expected loss £20 million (SD £5 million).\n\nThe town can invest in mitigation: (i) a sea‑wall that reduces the storm‑surge probability by 60 % at a one‑time cost of £8 million, (ii) upgraded containment that cuts the chemical‑spill loss by 40 % at a one‑time cost of £5 million. Costs are amortised straight‑line over 20 years. Assuming the hazards are independent, which combination of measures minimises the expected annual loss net of amortised mitigation costs? State the optimal choice and the resulting net expected annual loss (in £ million).