Chapter 5

Probability: Review of
Basic Concepts

I. Graphic Summary

II. Problem Solutions

III. Exercise Set

IV. Self-Examination

Notes:
76 Introduction to Business Statistics Study Guide

I. Graphic Summary

Probability

Classical Approach Relative Frequency Subjective Approach

Approach

Number of possible Number of possible Determination of

outcomes in which the outcomes in which the probability is simply a
event occurs event occurs "hunch"; an educated
P= guess
Total number of Total number of trials
possible outcomes
 Chapter 5 Probability: A Review of Basic Concepts 77

Representations of Sample Spaces

Tabular Visual

Contingency Table Venn Diagram

Mutually No ele ment is in two categories The areas for each category
Exclusive: at the same time. not overlap, or, if they do, the
common area contains no
elements.

[A B]

1cD

Exhaustive: Every element is in at least one Every element is in one of the

of the categories given, areas given. No element is in
the shaded area.

Intersection: All elements that are in both

categories given.

Union: All elements in either category

given.
78 Introduction to Business Statistics Study Guide

Some Straight Talk

About Unions and Intersections
and the Addition Rules
for Probability

Suppose we have two sets of elements, set A and set B. The number of elements in A
or in B, taken together in the union of A and B, cannot be the simple sum of the
elements in A plus the elements in B. Why? By adding all the elements in B to all the
elements in A, some of the elements are double-counted. Which ones? The elements
in the intersection of A and B are counted twice, once when we count the members of
A and again when we add the members of B. So, to get an accurate count of the
number of elements in the union of A and B, we have to add B’s elements to A’s
elements and then subtract those elements that are in the intersection of A and B.

Number of
Number of Number of Number of elements in the
elements in the elements in + elements in - intersection of
unionofAandB setA setB AandB

However, ifA and B are mutually exclusive, there are no elements in their intersection,
and

Number of Number of Number of

elements in the = elements in + elements in Zero
unionofAandB setA setB

So, if you remember that the intersection of mutually exclusive sets is empty, you only
need to remember the first equation and substitute zero for the number in the
intersection of the two sets.

Now, remembering that a probability is the number of elements divided by the total
number of trials, let’s convert the first equation to probabilities.

PA or B = PA + PB - PA and B

And that rule is true whether A and B are mutually exclusive or not. If they are
mutually exclusive, then PA and B = 0, and PA or B = PA + PB.
 Chapter 5 Probability: A Review of Basic Concepts 79

Illustrations of Different Probabilities

Suppose we have the following contingency table, showing four regions of the United
States in which people live and three types of music people listen to.

Classical Country Rock

Southeast 50 40 85
Southwest 105 85 160
Northeast 80 70 125
Northwest 65 55 80

Let’s total the number of people in each region and the number of people who listen to
each of the types of music.

Classical Country Rock

Southeast 50 40 85 175
Southwest 105 85 160 350
Northeast 80 70 125 275
Northwest 65 55 80 200
300 250 450 1,000

A Marginal Probability is the sum sitting in the margin either the margin at the right
or the margin at the bottom divided by the total number of trials, which, in this ex
ample, is 1,000.

So, the marginal probability that a person in the sample:

*listens to rock music is 450/1000, or 0.450.
*lives in the Northwest is 200/1000, or 0.200.
*listens to country music is 250/1000, or 0.250.
*lives in the Southeast is 175/1000, or 0.175.
 80 Introduction to Business Statistics Study Guide

More on Types of Probabilities

Continuing with our example, let us define a joint probability. Ajoint probability is
the probability that two or more events will all occur.

Classical Country Rock

Southeast 50 40 85 175
Southwest 105 85 160 350
Northeast 80 70 125 275
Northwest 65 55 80 200
300 250 450 1,000

So the joint probability that a person in the sample:

*lives in the Southwest and listens to rock music is 160/1000, or 0.160.
*lives in the Northeast and listens to classical is 80/1000, or 0.080.
*listens to country music and lives in the Southwest is 85/1000, or 0.085.

A Conditional Probability is the probability that an event will occur given that an
other event has already happened. It is computed by taking the joint probability that
both events occur and dividing by the marginal probability that the given event occurs.

So the conditional probability that a person selected at random:

*lives in the Southwest given you know he/she listens to rock music is the probabil
ity of living in the Southwest and listening to rock divided by the marginal prob
ability of listening to rock music, or
PSouthwes and rock 0.160
PSouthwest I rock = 0.3556.
= Prock = 0.450

*listens to country given you know he/she lives in the Southwest is the probability
of listening to country and living in the Southwest divided by the marginal prob
ability of living in the Southwest, or
and Southwest
Pcountry 0.085
Pcountry I Southwest = 0.243.
= PSouthwest = 0.350
 Chapter 5 Probability: A Review of Basic Concepts 81

Mutually Exclusive
versus
Independent Events

If two sets are mutually exclusive, there is literally nothing in one that is also in the
other. If two events are mutually exclusive, one event cannot occur if the other event
does occur. Examples include "on/off’, "yes/no", "win/lose". Mutually exclusive
events need not appear in pairs. As long as no element in one set also appears in an
other, the sets are mutually exclusive. If events A and B are mutually exclusive, then

PA and B = 0 and PB I A as well as PA I B =0

If two events are independent, the fact that one event occurs does not affect the
chances that the other event will also occur. Unlike mutually exclusive events, inde
pendent events may both occur. Or they may not. If the two sets are independent, the
conditional probability that an element of set A is also in set B is the same as the mar
ginal probability that the element is in set B to begin with. Thus, the fact that the ele
ment is in

*does not affect 1

set A r
*has nothing to do with its chances of also being a member of B.
t .is independent from J

Computationally, if two events are independent, then their joint probability is the
product of their two marginal probabilities. Why? Because the probability that an
element is in A does not change if the element is also in B. So,

PA and B = PA x PB I A
= PA x PB if the events A and B are independent.

If the two events are not independent, however, the fact that an element is in set A
does affect the probability that it is also in B. If two events are not independent, the
conditional probability that an element is in B given you know it is in A does not equal
the marginal probability that the element is in B. So,

PA and B = PA x PB I A if the events A and B are dependent.

 ______________________________
______________________________
_________
_________

82 Introduction to Business Statistics Study Guide

Contingency Tables
and Probability Trees

Let’s return to the example we developed earlier in this chapter, and develop a
probability tree that displays the same information as the contingency table.

Classical Country Rock

Southeast 50 40 85 175
Southwest 105 85 160 350
Northeast 80 70 125 275
Northwest 65 55 80 200
300 250 450 1,000

Region Type ofMusic

50/175 Classical
Southeast 40/175 Country Notice that the regional
175/1000 85/175 Rock probabilities are all
marginal probabilities,
and the probabilities for
105/350 Classical
each type of music in
- Southwest_ 85/350 Country each of the four regions
350/1000 160/350 Rock are all conditional
probabilities. So, the
80/275 Classical probability that
someone listens to
Northeast 70/275 Country
classical, for example,
275/1000 125/275 Rock changes depending on
which region he/she
65/200 Classical lives in.
Northwest 5 5/200 Country
200/1000 80/200 Rock
 Chapter 5 Probability: A Review of Basic Concepts 83

Using Contingency Tables

to Flip Probability Trees

The probability tree we developed on the prior page shows the regions first and the
types of music preferred as contingent upon the region in which someone lives. But,
suppose we want to show the tree the other way around; that is, suppose we wanted to
show the types of music first and the regional identifications as contingent upon the
types of music preferred.

Classical Country Rock

Southeast 50 40 85 175
Southwest 105 85 160 350
Northeast 80 70 125 275
Northwest 65 55 80 200
300 250 450 1,000

Type ofMusic Region

50/300 Southeast
Southwest Notice now that the
Classical music types are
Northeast
marginal probabilities,
Northwest
and the probabilities for
each region are all
40/250 Southeast conditional
Southwest probabilities. So, the
Northeast probability that
250/1000 someone lives in the
Northwest
Southeast, for example,
changes depending on
8 5/450 Southeast which type of music he!
Southwest she listens to.
Rock
Northeast
450/1000
Northwest
 ___________________________
________

84 Introduction to Business Statistics Study Guide

Tree-Flipping
with Bayes’ Theorem

When events are sequentially arranged, as with the two probability trees we have just
developed, information from a second event can be used to revise the probability that
the first event has occurred. Let’s revisit our first probability tree for an example.

Region Type ofMusic We know from this display

that Pclassical I Northwest
50/175 Classical = 65/200. And we know that

Southeast 40/175 Country the marginal probability of

175/1000 85/175 Rock living in the Northwest is
200/1000.

105/350 Classical Now, suppose we observe a

Southwest 85/350 Country person at random and notice
350/1000 160/350 Rock he/she is listening to
classical music. Given we
know the person listens to
80/275 Classical
classical music, what is the
Northeast 70/275 Country probability that person lives
275/1000 125/275 Rock in the Northwest?

65/200 Classical What we want to find,

then, is the
Northwest 55/200 Country
PNorthwest I classical.
200/1000 80/200 Rock

Continued on next page.

 Chapter 5 Probability: A Review of Basic Concepts 85

Tree-Flipping
with Bayes’ Theorem, continued

PNorthwest and classical

Remember that the PNorthwest I classical =
Pclassical

So, our first step is to compute Pclassical. To accomplish that, we look for all the
branches of the tree where people listen to classical music.

Southeast Southwest Northeast Northwest

Pclassical =1
P175
x
1

+1
Po x
1011I +1P275 x
801 +1P200 x 651I
[±000 17J [±000 35J [±000 27J [±000 20j

50 105 80 65 300
+ + +
1000 1000 1000 1000 1000

And, we know from the above tree that PNorthwest and classical = 65/1000.
86 Introduction to Business Statistics Study Guide

Tree-Flipping:
A Comparison of Methods

Now, compare the result we just derived with Bayes’ Theorem to the tree we flipped
using the contingency table. Notice that both results show PNorthwest I classical
65/300.

So, we are able to accomplish the same result two different ways. Being able to use
Bayes’ Theorem, however, is a real asset when you do not have a complete
contingency table to work with. For the formal statement of the theorem, see your
textbook. For now, let’s review here the general form of the theorem. We will assume
that you are given enough information to construct a complete probability tree with
which to work.

1. First, focus on the question being asked. Write out the conditional probability the
question poses, such as "Find PB I A."

2. Next, write down the definition of the conditional probability, such as

the joint probailty of Band A - PBand A
PB I A
the marginal probability of the condition
- - PA

3. The next step is the crux of your computation. To compute the marginal
probability of the condition, PA, identify all the branches of the tree where that
condition holds. Use the Multiplication Rule for Probability to compute the
probability associated with each of the branches you identified. And then add up
the products you computed for the total marginal probability of the condition,
PA. This sum will be the denominator of your answer.

4. Now, identify the branch where both conditions B and A exist. Again, use the
Multiplication Rule for Probability to compute the joint probability. This product
will be the numerator of your final answer, PB and A.

5. Finally, form the ratio of the joint probability over the marginal probability to
determine the value of PB I A.

Remember that what Bayes’ Theorem allows you to do is switch the conditions. Using
Bayes’ Theorem, you can compute PB I A from a tree that has PA I B.
 Chapter 5 Probability: A Review of Basic Concepts 87

Orderings and Factorials

The same three items can be arranged six different ways when the order in which they
appear is important. The number of ways n things can be arranged is n! read "n
factorial", where n! = n x n-i x n-2 x x 1. Suppose Hometown, USA, just
...

announced the first, second, and third place winners of the Volunteer of the Year
Award. The three candidates can be uniquely ordered 3! = 3 x 2 x 1 = 6 different
ways. They might look like this:

1st 2nd 3rd 1st 2nd 3rd 1st 2nd 3rd

1st 2nd 3rd 1st 2nd 3rd 1st 2nd 3rd

Suppose that a newspaper reporter is trying to get to Hometown to cover the banquet
scheduled tomorrow night. She can drive one of three cars in the paper’s car pooi,
and she can select from four different routes to get there. According to the Principle
of Multiplication, there are 3 x 4 or 12 different ways for the reporter to get to
Hometown.
88 Introduction to Business Statistics Study Guide

Permutations

When order is important, as in the Volunteer of the Year Award, the arrangements are
called Permutations.

Suppose we wanted to select two winners, a first and a second, out of four finalists.
The local newspaper might run one of the following twelve pair of pictures.

The Finalists

&a

The Possible Winners

Thus, there are twelve unique pairs of possible winners when order is important. We
call this set the number of permutations of 4 objects taken 2 at a time.
Computationally,
n! 4! 4x3x2x 1
or = 12
n-r! 2! 2xi
 Chapter 5 Probability: A Review of Basic Concepts 89

Combinations

When order is not important, the arrangement is called a Combination.

Suppose the Hometown City Council wants to name a special committee to study
more effective ways to utilize volunteers in the community. From a panel of four
candidates, the Council will select two people to serve on the committee. The order in
which the candidates are selected is not important. How many different committees
can the Council form from the four candidates?

C
The Candidates

L
Notice that there are six pairs of duplicate committees in the twelve permutations
identified on the prior page. While there are twelve unique permutations of 4 people
taken 2 at a time, there are only six unique combinations of 4 people taken 2 at a time
when the order in which they are selected is not important.

Computationally,
n 4! 4x3x2xi
or 6 unique committees
‘4 r! n-r! 2! 4-2! 2 x 1 x2x 1
of 2 people each can
be selected from 4
people
90 Introduction to Business Statistics Study Guide

II. Problem Solutions

STUDY GUIDE PROBLEM:

Fatalities from poisoning by gases and vapors during one year are described in the following
conti ngency table of frequencies, where M = male, F female.
<5 5-14 15-24 25-44 45-64 65
M 14 20 137 311 188 117
F 11 9 66 65 57 84

For a randomly selected victim of poisoning by gases and vapors, determine:

a PM
b PF
c PFand5-14
d PForS-14
e PM and 25-44
f PM or 25-44
g PM I25-44
h PF I25-44
i PF or 5-14 or 45-64
j P[F] and [5-14 or 45-64]

THIS PROBLEM DEALS WITH THE DIFFERENT TYPES OF PROBABILITIES.

ANSWERS NOTES

a Pmale Marginal or simple probability

Take the number of males and divide by the

total number ofpeople.

ANSWER: = 1079
 Chapter 5 Probability: A Review of Basic Concepts 91

STUDY GUIDE PROBLEM, continued

b Pfemale Marginal or simple probability

Take the number offemales and divide by the

total number ofpeople. *

ANSWER: =

*Another way to work this is to recognize

that being male and being female are
complementary events. So
Pfemale = 1 Pmale
-

= 1 -787/1079
= 292/1079

c Pfemale and 5-14 Joint probability

Intersection of two events

Take the number ofpeople who are both

female and aged 5-14, and divide by the total
number ofpeople.

ANSWER: = 1079

d Pfemale or 5-14 Union of two events

Not mutually exclusive events

292 29 9 Use Addition Rule for Probability, PA or B

- 1079 + 1079 - 1079 = PA + PB PA and B
-

ANSWER: =
92 Introduction to Business Statistics Study Guide

STUDY GUIDE PROBLEM, continued

e Pmale and 25-44 Joint probability

Intersection of two events

Take the number ofpeople who are both

male and aged 25-44, and divide by the total
number ofpeople.

ANSWER: = 79

1 Pmale or 25-44 Union of two events

Not mutually exclusive events

787 376 311 Use Addition Rule for Probability, PA or B

= 1079 + 1079 - 1079 = PA + PB PA and B
-

852
ANSWER: =
1079

g Pmale I 25-44 Conditional Probability

Take the number of people who are both

male and 25-44, and divide by the number of
people who are 25-44.

ANSWER: =

h Pfemale I25-44 Conditional Probability

Take the number ofpeople who are both

female and 25-44, and divide by the number
ofpeople who are 25-44.

ANSWER: =
 Chapter 5 Probability: A Review of Basic Concepts 93

STUDY GUIDE PROBLEM, continued

i Pfemale or 5-14 or 45-64 Union of three events

Visualize the Venn diagram relating the three

events of interest:

292 29 245 9 57 Use the general rule of addition,

1079 + 1079 + 1079 - 1079 - 1079 PA or B or C = PA + PB + PC -

-0+0 PA and B PA and C PB and C +

- -

PA and B and C

500
ANSWER: =
1079

j P[female] and [5-14 or 45-64] Visualize the Venn diagram relating the three
events of interest:
94 Introduction to Business Statistics Study Guide

STUDY GUIDE PROBLEM, continued

- 9 57 Pfemale and [5-14 or 45-64] =

0 Pfemale and 5-14
- 1079 + 1079
+ Pfemale and 45-64
- P5-14 and 45-64

ANSWER:
= 1079
 Chapter 5 Probability: A Review of Basic Concepts 95

PROBLEM 5.69:

Data from the Federal Bureau ofInvestigation show that 1 ofevery 155 motor vehicles was
stolen during 1997. Applying this statistic to 5 motor vehicles randomly selected from the
nation’s auto population:
a What is the probability that none of the 5 motor vehicles will be stolen?
b What is the probability that all 5 motor vehicles will be stolen?
c How many possibilities exist in which 2 of the 5 motor vehicles are stolen?

THIS PROBLEM DEALS WITH THE MULTIPLICATION RULES AND COMBINATIONS.

ANSWERS NOTES

a Pnone of 5 cars stolen Joint probability

Each of the five events is independent of the

others.

= PA x PB x PC x PD x PE Use the Multiplication Rulefor independent

events, where the probability of a single event
is 154/155.

r1n i
ANSWER: = I -- I = 0.9682
Li 55]

b Pall 5 cars stolen Joint probability

Each of thefive events is independent of the

others.

= PA x PB x PC x PD x PE Use the Multiplication Rule for independent

events, where the probability of a single event
is 1/155.

r 1 i Notice that parts a and b are

ANSWER:
= [] = 0.03 18 complements of one another. So one answer
is 1 minus the other answer.
96 Introduction to Business Statistics Study Guide

PROBLEM 5.69, continued

c How many ways can 2 of 5 motor Order in which the motor vehicles are stolen
vehicles be stolen? is not important.

Combination of independent events

2
HANDHELD CALCULATOR:
5! Most calculators will automatically calculate
= 2 x combinations. Check your calculator keypad
or look in your owner’s manualfor
instructions.

MICROSOFT EXCEL:
In a cell on an Excel spreadsheet, type:
= combin5,2

You can also activate Excel’s combination

function under the function key on the top
menu bar. Select either ALL or MATH &
TRIG categories and double click on
COMBINATION to bring up the dialog box.

ANSWER: = 10
 Chapter 5 Probability: A Review of Basic Concepts 97

PROBLEM 5.74:

Special Note: The solutions are developed with and without the probability tree. Notice how
much easier the problem is to work once its probability tree is developed. Spend some time
relating the solutions using probability rules with those using the tree.

In examining borrower characteristics versus loan delinquency, a bank has collected the
following information: 115% of the borrowers who have been employed at their present job for
less than 3 years are behind in their payments; 2 5% ofthe borrowers who have been employed at
their present job for at least 3 years are behind in their payments; 3 80% ofthe borrowers have
been employed at their present job for at least 3 years. Given this information:
a What is the probability that a randomly selected loan account will be for a person in the
same job for at least 3 years who is behind in making payments?
b What is the probability that a randomly selected loan account will be for a person in the
same job for less than 3 years or who is behind in making payments?
c If a loan account is behind, what is the probability that the loan is for a person who has been
in the same job for less than 3 years?

THIS PROBLEM DEALS WITH CONDITIONAL PROBABILITIES AND TREE-FLIPPING.

ANSWERS NOTES

a Pat least 3 years and behind Joint probability

Intersection of events

Pbehind I at least 3 yrs = 0.05 List the information given in the problem.
Pat least 3 yrs = 0.80

Pbehind Iat least 3 yrs Write out the definition of the conditional
- Pbehind and at least 3yrs probability.
- Pat least 3 yrs

x Answer is the numerator of the fraction

Pbehind I at least 3 yrs defining the conditional probability.
= Pat least 3 yrs

x Solve for the numerator.

0.05 = j- so 0.05 0.80 = x

ANSWER: = 0.05 0.80 = 0.04

OR

Construct the appropriate probability tree

from the information given.
98 Introduction to Business Statistics Study Guide

PROBLEM 5.74, continued

0.15 Behind 0.03

Less then 3 jrs
0.20 0.85 Not behind 0.17

0.05 Behind 0.04

t least 3 yrs
0.80 0.g5 Not behind 0.76

Note that the answer to part a is the

probability of being at the third branch of the
tree shown below.

= 0.80 0.05 Use the Multiplication Rule to compute

probability for the third branch.

ANSWER: = 0.04

b Pless than 3 yrs or behind

= Pless than 3 yrs + Pbehind - Union of events.

Pless than 3 yrs and behind Use the Addition Rule.

First, we need to find

Pless than 3 yrs and behind

Pbehind Iless than 3 yrs Write out definition of conditional

- Pbehind and les than 3yrs probability.
- Pless than 3 yrs

Pbehind Iless than 3 yrs The joint probability Pless than 3 yrs and
x behind is the numerator of the fraction
- Pless than 3 yrs defining the conditional probability.

x Solvefor the numerator.

- 0.15 so 0.150.20=x
- 0.20

0. 15 0.20 = 0.03
 Chapter 5 Probability: A Review of Basic Concepts 99

PROBLEM 5.74, continued

Pbehind = Next, we need to find Pbehind.

Pless than 3 yrs x Pbehind Iless than 3 yrs +
Pat least 3 yrs x Pbehind Iat least 3 yrs

= 0.20 0.15 + 0.80 0.05

= 0.03 + 0.04
Pbehind = 0.07

= Pless than 3 yrs + Pbehind - Finally, we put it all together, using the
Pless than 3 yrs and behind Addition Rule we already cited.
= 0.20 + 0.07 0.03
-

ANSWER: = 0.24

OR

Part b, alternate solution Construct the appropriate probability

tree from the information given. See
the tree shown in part a solution.

Note that the answer is the probability

of less than 3 yrs plus the probability of
those who are more than three yrs and
behind.

= 0.20 + 0.04 To the Pless than 3 yrs, then, we add

the probability of being on the third
branch of the tree.

ANSWER: = 0.24
100 Introduction to Business Statistics Study Guide

PROBLEM 5.74, continued

c Pless than 3 yrs Ibehind Conditional probability

Pless than 3 yrs Ibehind Write out the definition of the conditional
- Ples than 3 yrs and behind probability.
- Pbehind

Pless than 3 yrs and behind = 0.03 Repeat calculation for Pless than 3 yrs and
behind completed in Part b above.

Pbehind = 0.07 Repeat calculation for Pbehind completed

in Part b above.

Substitute values into the definition for the

Pless than 3 yrs Ibehind =
conditionalprobability.

ANSWER:
 Chapter 5 Probability: A Review of Basic Concepts 101

PROBLEM 5.77:

The chairperson of the accounting department has three summer courses available: Accounting
201, Accounting 202, and Accounting 305. Twelve faculty are available for assignment to these
courses and no faculty member can be assigned to more than one of them. In how many ways
can the chairperson assign faculty to these courses?

THIS PROBLEM DEALS WITH PROBABILITIES AND PERMUTATION.

ANSWER NOTES

How many ways can three courses be filled Order is important.

by the pool of twelve faculty?

12! Permutation, 12 things taken 3 at a time

=l2xllxlO
HANDHELD CALCULATOR:
Most calculators will automatically calculate
permutations. Check your calculator keypad
or look in your owner’s manual for
instructions.

MICROSOFT EXCEL:
In a cell on an Excel spreadsheet, type:
= permut12,3

You can also activate Excel’s combination

function under the function key on the top
menu bar. Select the STATISTICAL category
and double click on PERMUTATION to
bring up the dialog box.

ANSWER: = 1,320 ways

102 Introduction to Business Statistics Study Guide

III. Exercise Set

Exercise Set 5

1. Suppose that fatalities from poisoning by gases and vapors rose in another year see the extra
problem. And suppose you found the following probability tree in the next year’s literature relating
sex ofthe victim with age brackets.

A. From the probability tree below, reconstruct the contingency table of frequencies.

17/flu Less than 5

5-14
t2BlUl 1 15-24
Male 25-44
811/1153 45-64
Greater than 65

Less than 5
B/342 5-14
Female
15-24
342/1153 65/342 25-44
45-64
Greater than 65

B. For a randomly selected victim of poisoning by gases and vapors, determine the following
probabilities:

a Pmale b Pfemale

c Pfemale and 5-14 d Pfemale or 5-14

e Pmale and 25-44 f Pmale or 25-44

g Pmale I 25-44 h Pfemale I 25-44

i Pfemale or 5-14 or 45-64 j P[femalej and [5-14 or 45-64]

 Chapter 5 Probability: A Review of Basic Concepts 103

2. Suppose that data from the local county sheriff’s office showed that 2 ofevery 541 automobiles in the
county were vandalized last year.

a Is this a population or a sample measure?

b Applying this to 7 cars randomly selected from the county’s automobile population, what is the
probability that all ofthe 7 cars will be vandalized?

c Applying this to 7 cars randomly selected from the county’s automobile population, what is the
probability that none of the 7 cars will be vandalized?

d How many possibilities exist in which 3 ofthe 7 automobiles will be vandalized?

3. In examining customer telephone habits versus income levels, a regional telephone study reported the
following information: 1 25% of the heavy long-distance users had annual household income in
excess of $50,000, 2 90% of the medium-to-light long-distance customers had annual household
income below $50,000, and 3 70% of the long-distance users fall into the medium-to-light user
group. Given this information:

a What is the probability that a randomly selected telephone account will be for a heavy long-
distance user with an annual household income in excess of $50,000?

b What is the probability that a randomly selected telephone account will be for a medium-to-light
long-distance user with an annual household income in excess of $50,000?

c If a telephone account to a household with annual income in excess of $50,000 is selected, what is
the probability that the account is for a person who is a heavy long-distance user?

4. Five new drivers report to the regional office of the National Parcel Delivery NPD, where seven
delivery routes remain uncovered. Each driver can only be assigned to one route. In how many ways
can the new drivers be assigned to the available delivery routes?
104 Introduction to Business Statistics Study Guide

Answers: Exercise Set 5

l.A.

AGE

<5 5-14 15-24 25-44 45-64 65 Totals:

Male 17 25 128 327 196 118 811

SEX
Female 13 8 74 85 61 101 342

Totals 30 33 202 412 257 211 1153

1.B.
a 811/1153 b 342/1153 c 8/1153

d 367/1153 e 327/1153 0 896/1153

g 327/412 h 85/412 i 563/1153

j 69/ 1153

2. a sample measure b
r 2
I- c r
L 541 L 541
7 7!
d 3 = 3!4! = 35

0.075
3. a 0.075 b 0.07 c 0.145

4. = 42
 Chapter 5 Probability: A Review of Basic Concepts 105

IV. Self-Examination: Chapter 5

You have applied for a job and are told by the interviewer that the probability ofyour being hired is
0.60. Your odds of being hired are:
a. 0.6to4,or3to50
b. 6tolO,or3to5
c. 6to4,or3to2
d. 40to60,or2to3
e. 100 to 60, or5to3

2. Your instructor announced that he gives a pop quiz in 20% ofthe class meetings. What are the
odds that you will have a pop quiz in a given class meeting?
a. 0.2 to 80, or 1 to 400
b. 2tol0,orlto5
c. 2to8,orlto4
d. 80to20,or4tol
e. 100 to 20, or 5 to 1

USE THE FOLLOWING FOR THE NEXT TEN QUESTIONS #3 #12: -

The table below gives the probabilities of religious and political affiliations in a major U.S. city.
A B C D
Protestant Catholic Jewish Other
E Democrat 0.30 0.10 0.05 0.02
F Republican 0.25 0.10 0.02 0.02
G Independent 0.05 0.05 0.02 0.02

3. What is the probability that a person selected at random is a Catholic?

a. 0.10
b. 0.25
c. 0.47
d. 0.75
e. 0.82

4. What are the odds that a person selected at random is a Catholic?

a. lOto9O,orlto9
b. 25to75,orlto3
c. 47to53
d. 75to25,or3tol
e. 100 to 25, or 4 to 1

5. What is the probability that a person selected at random is a Catholic and a Republican?
a. 0.10
b. 0.25
c. 0.39
d. 0.40
e. 0.43
106 Introduction to Business Statistics Study Guide

6. What is the probability that a person selected at random is a Catholic and at the same time either a
Democrat or a Republican?
a. 0.11
b. 0.20
c. 0.25
d. 0.86
e. 0.90

7. What is the probability that a randomly selected person is a Democrat whose religion is neither
Catholic nor Jewish?
a. 0.15
b. 0.20
c. 0.28
d. 0.32
e. 0.40

8. Given a person randomly selected is known to be Protestant, what is the probability the person is a
Democrat?
a. 0.28
b. 0.47
C. 0.50
d. 0.64
e. 0.70

9. Given a person randomly selected is known to be Democrat, what is the probability the person is a
Protestant?
a. 0.28
b. 0.47
C. 0.50
d. 0.64
e. 0.70

10. Given a person randomly selected is known to be not a Protestant, what is the probability the
person is a Democrat?
a. 0.17
b. 0.19
c. 0.27
d. 0.425
e. 0.452

11. Find the probability PFIB.

a. 0.10
b. 0.26
c. 0.40
d. 0.64
e. 0.70
 Chapter 5 Probability: A Review of Basic Concepts 107

12. Find the probability PBIF.

a. 0.10
b. 0.26
c. 0.40
d. 0.64
e. 0.70

USE THE FOLLOWING FOR THE NEXT SIX QUESTIONS #13 #18: -

A personnel manager is reviewing the number of overtime hours worked by employees in her plant last
month. She compiled the following data:

No. of Overtime No. of Probability

Hours Worked Employees Px
0 15 0.125
1-2 21 0.175
3-4 24 0.200
5-6 42 0.350
7-8 12 0.100
More than 8 6 0.050

13. Which variable measures the frequency?

a. Number of overtime hours worked
b. Number of employees
c. Probability
d. Probability times number of overtime hours worked
e. Probability times number ofemployees

14. What is the probability that a randomly selected employee worked no overtime hours last month?
a. 0.125
b. 0.30
C. 0.50
d. 0.875
e. 0.925

15. What is the probability that a randomly selected employee worked at most 4 overtime hours last
month?
a. 0.125
b. 0.30
C. 0.50
d. 0.875
e. 0.925
108 Introduction to Business Statistics Study Guide

16. What is the probability that a randomly selected employee worked less than 7 overtime hours last
month?
a. 0.10
b. 0.85
c. 0.90
d. 0.95
e. 0.975

17. What is the probability that a randomly selected employee worked less than 7 but more than 4
overtime hours last month?
a. 0.35
b. 0.65
c. 0.85
d. 0.95
e. 0.975

18. What is the probability that a randomly selected employee worked at least 3 but less than 7
overtime hours?
a. 0.20
b. 0.35
C. 0.55
d. 0.65
e. 0.95

USE THE FOLLOWING FOR THE NEXT FOUR QUESTIONS #19 #22: -

A sidewalk yogurt vendor sells three flavors: chocolate, vanilla, and fruit. Forty percent of sales are
chocolate, while 35% are vanilla with the rest fruit flavored. Sales are by the cone or the cup. The
percentages of cones sales for chocolate, vanilla and fruit, respectively, are 80%, 60% , and 40%. For a
randomly selected sale, let
A1 = event chocolate chosen
A2 = event vanilla chosen
A3 = event fruit chosen
B = event yogurt on a cone

19. Find the probability PB.

a. 0.20
b. 0.37
c. 0.63
d. 0.80
e. 0.95

20. Find the PA2IB.

a. 0.1419
b. 0.210
c. 0.320
d. 0.3333...
e. 0.420
 Chapter 5 Probability: A Review of Basic Concepts 109

21. Find the probability PB ‘.

a. 0.20
b. 0.37
c. 0.63
d. 0.80
e. 0.95

22. Find the posterior probability that, given the yogurt was sold in a cup, it was fruit yogurt.
a. 0.1419
b. 0.210
c. 0.320
d. 0.3333...
e. 0.420

23. Six students from a statistics class have formed a study group. Each may or may not attend a
study session. Assuming that the members will be making independent decisions on whether or
not to attend, how many different possibilities exist for the composition of the study session?
a. 6
b. 64
c. 120
d. 720
e. 980

24. At a track meet, six runners are competing in the 100-yard dash. First, second and third place
trophies will be awarded. In how many ways can the trophies be awarded?
a. 6
b. 64
c. 120
d. 720
e. 980

25. An investment counselor would like to meet with 12 of her clients on Wednesday, but she only
has time for 8 appointments. How many different ways can the clients be considered for inclusion
into her limited schedule for the day if the order in which the clients are scheduled is not
important?
a. 96
b. 495
c. 95,040
d. 79,833,600
e. 695,782,043,300
110 Introduction to Business Statistics Study Guide

Answers to Self-Examination: Chapter 5

1. C Topic: odds
2. C Topic: odds
3. B Topic: marginal probability
4. B Topic: odds
5. A Topic: joint probability, unions and intersections
6. B Topic: unions and intersections
7. D Topic: unions and intersections
8. C Topic: conditional probability, unions and interseëtions
9. D Topic: conditional probability, unions and intersections
10. D Topic: conditional probability, unions and intersections
11. C Topic: conditional probability, unions and intersections
12. B Topic: conditional probability, unions and intersections
13. B Topic: frequency distributions
14. A Topic: simple probability
15. C Topic: unions and intersections
16. B Topic: unions and intersections
17. A Topic: unions and intersections
18. C Topic: unions and intersections
19. C Topic: Bayes
20. D Topic: Bayes
21. B Topic: complements
22. A Topic: Bayes
23. B Topic: multiplication rule
24. C Topic: permutation
25. B Topic: combination