Review Exercises 2

REVIEW EXERCISES 2 – Prob and Stats
1. Continuous distribution:
Ex1: A company services home air conditioners. It is known that times for service
calls follow a normal distribution with a mean of 60 minutes and a standard
deviation of 10 minutes.
a. What is the probability that a single service call takes more than 65 minutes?
b. What is the probability that a single service call takes between 50 and 70
minutes?
c. The probability is 0.025 that a single service call takes more than how many
minutes?
d. Find the shortest range of times that includes 50% of all service calls.
e. A random sample of four service calls is taken. What is the probability that
exactly two of them take more than 65 minutes?
Ex 2: According to the National Association of Colleges and Employers, the

average starting salary for new college graduates in health sciences is $51,541. The
average starting salary for new college graduates in business is $53,901 (National
Association of Colleges and Employers website, January 5, 2015). Assume that
starting salaries are normally distributed and that the standard deviation for starting
salaries for new college graduates in health sciences is $11,000. Assume that the
standard deviation for starting salaries for new college graduates in business is
$15,000.
a. What is the probability that a new college graduate in business will earn a
starting salary of at least $65,000?
b. What is the probability that a new college graduate in health sciences will earn a
starting salary of at least $65,000?
c. What is the probability that a new college graduate in health sciences will earn a
starting salary less than $40,000?
d. How much would a new college graduate in business have to earn in order to
have a starting salary higher than 99% of all starting salaries of new college
graduates in the health sciences?
Estimation
Ex 3: Sales personnel for Skillings Distributors submit weekly reports listing the
customer contacts made during the week. A sample of 65 weekly reports showed a
sample mean of 19.5 customer contacts per week. The sample standard deviation
was 5.2. Provide 90% and 95% confidence intervals for the population mean
number of weekly customer contacts for the sales personnel
Ex 4: The mean cost of a meal for two in a mid-range restaurant in Tokyo is $40
(Numbeo.com website, December 14, 2014). How do prices for comparable meals
in Hong Kong compare? The DATAfile HongKongMeals contains the costs for a
sample of 42 recent meals for two in Hong Kong mid-range restaurants.
a. With 95% confidence, what is the margin of error?
b. What is the 95% confidence interval estimate of the population mean?
c. How do prices for meals for two in mid-range restaurants in Hong Kong
compare to prices for comparable meals in Tokyo restaurants?
Ex 5: The U.S. Energy Information Administration (US EIA) reported that the
average price for a gallon of regular gasoline is $3.94 (US EIA website, April 6,
2012). The US EIA updates its estimates of average gas prices on a weekly basis.
Assume the standard deviation is $.25 for the price of a gallon of regular gasoline
and recommend the appropriate sample size for the US EIA to use if they wish to
report each of the following margins of error at 95% confidence.
a. The desired margin of error is $.10.
b. The desired margin of error is $.07.
c. The desired margin of error is $.05.
Ex 6. One of the questions on a survey of 1000 adults asked if today’s children will
be better off than their parents (Rasmussen Reports website, October 26, 2012).
Representative data are shown in the DATAfile named ChildOutlook. A response
of Yes indicates that the adult surveyed did think today’s children will be better off
than their parents. A response of No indicates that the adult surveyed did not think
today’s children will be better off than their parents. A response of Not Sure was
given by 23% of the adults surveyed.
a. What is the point estimate of the proportion of the population of adults who do
think that today’s children will be better off than their parents? (sample proportion)
b. At 95% confidence, what is the margin of error?
c. What is the 95% confidence interval for the proportion of adults who do think
that today’s children will be better off than their parents?
d. What is the 95% confidence interval for the proportion of adults who do not
think that today’s children will be better off than their parents?
e. Which of the confidence intervals in parts (c) and (d) has the smaller margin of
error? Why?
Ex 7: In 16% of all homes with a stay-at-home parent, the father is the stay-at-
home parent (Pew Research, June 5, 2014). An independent research firm has been
charged with conducting a sample survey to obtain more current information.
a. What sample size is needed if the research firm’s goal is to estimate the current
proportion of homes with a stay-at-home parent in which the father is the stay-at-
home parent with a margin of error of .03? Use a 95% confidence level.
b. Repeat part (a) using a 99% confidence level.
Hypothesis Testing
Ex9: The chamber of commerce of a Florida Gulf Coast community advertises that
area residential property is available at a mean cost of $125,000 or less per lot.
Suppose a sample of 32 properties provided a sample mean of $130,000 per lot and
a sample standard deviation of $12,500. Use a .05 level of significance to test the
validity of the advertising claim.
Ex10: On December 25, 2009, an airline passenger was subdued while attempting
to blow up a Northwest Airlines flight headed for Detroit, Michigan. The
passenger had smuggled explosives hidden in his underwear past a metal detector
at an airport screening facility. As a result, the Transportation Security
Administration (TSA) proposed installing full-body scanners to replace the metal
detectors at the nation’s largest airports. This proposal resulted in strong objections
from privacy advocates who considered the scanners an invasion of privacy. On
January 5–6, 2010, USA Today conducted a poll of 542 adults to learn what
proportion of BritainMarriages WeeklyPay Copyright 2018 Cengage Learning. All
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WCN 02-200-203 434 Chapter 9 Hypothesis Tests airline travelers approved of
using full-body scanners (USA Today, January 11, 2010). The poll results showed
that 455 of the respondents felt that full-body scanners would improve airline
security and 423 indicated that they approved of using the devices.
a. Conduct a hypothesis test to determine if the results of the poll justify
concluding that over 80% of airline travelers feel that the use of full-body scanners
will improve airline security. Use a = .05.
b. Suppose the TSA will go forward with the installation and mandatory use of
full-body scanners if over 75% of airline travelers approve of using the devices.
You have been told to conduct a statistical analysis using the poll results to
determine if the TSA should require mandatory use of the full-body scanners.
Because this is viewed as a very sensitive decision, use a = .01. What is your
recommendation?
Ex11: Members of the millennial generation are continuing to be dependent on

their parents (either living with or otherwise receiving support from parents) into
early adulthood (The Enquirer, March 16, 2014). A family research organization
has claimed that, in past generations, no more than 30% of individuals aged 18 to
32 continued to be dependent on their parents. Suppose that a sample of 400
individuals aged 18 to 32 showed that 136 of them continue to be dependent on
their parents.
a. Develop hypotheses for a test to determine whether the proportion of millennials
continuing to be dependent on their parents is higher than for past generations.
b. What is your point estimate of the proportion of millennials that are continuing
to be dependent on their parents?
c. What is the p-value provided by the sample data? d. What is your hypothesis
testing conclusion? Use alpha =.05 as the level of significance.
Ex12: A random sample of 1,556 people in country A were asked to respond to

this statement: Increased world trade can increase our per capita prosperity. Of
these sample members, 38.4% agreed with the statement. When the same statement
was presented to a random sample of 1,108 people in country B, 52.0% agreed.
Test the null hypothesis that the population proportions agreeing with this
statement were the same in the two countries against the alternative that a higher
proportion agreed in country B.
Ex13: In light of a recent large corporation bankruptcy, auditors are becoming

increasingly concerned about the possibility of fraud. Auditors might be helped in
determining the chances of fraud if they carefully measure cash flow. To evaluate
this possibility, samples of midlevel auditors from CPA firms were presented with
cash-flow information from a fraud case, and they were asked to indicate the
chance of material fraud on a scale from 0 to 100. A random sample of 36 auditors
used the cash-flow information. Their mean assessment was 36.21, and the sample
standard deviation was 22.93. For an independent random sample of 36 auditors
not using the cash-flow information, the sample mean and standard deviation were,
respectively, 47.56 and 27.56. Assuming that the two population distributions are
normal with equal variances, test, against a two-sided alternative, the null
hypothesis that the population means are equal.

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REVIEW EXERCISES 2 – Prob and Stats

Ex 2: According to the National Association of Colleges and Employers, the

Ex11: Members of the millennial generation are continuing to be dependent on

Ex12: A random sample of 1,556 people in country A were asked to respond to

Ex13: In light of a recent large corporation bankruptcy, auditors are becoming

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