Econ 4780/5640

1. Classify each of the following as nominal, ordinal, interval, and ratio data (9 points)
a. The time required to produce each tire on an assembly line.
b. The number of quarts of milk a family drinks in a month.
c. The ranking of four machines in your plant after they have been designated as
excellent, good, satisfactory, and poor.
d. The telephone area code of clients in the United States.
e. The age of each of your employee.
f. The dollar sales at the local pizza shop each month.
g. An employees identification number.
h. The response time of an emergency unit.
Answer:
(a) ratio
(b) ratio
(c) ordinal
(d) nominal
(e) ratio
(f) ratio
(g) nominal
(h) ratio
2. Determine the probabilities for the following normal distribution problems. (9 points)
a. 604, 56.8, x 635
b. 111, 33.8,100 x 150
c. 156, 11.4, x 170
Answer: (a)

= 604, = 56.8

P(X < 635)

x 635 604
z=
= 0.55

56.8
Table A.5 value for z = 0.55: .2088
P(X < 635) = P(Z 0.55) = .2088 + .5000 = .7088
(b)

= 111, = 33.8
P(100 < x < 150)
x 150 111
z=
= 1.15

33.8
Table A.5 value for z = 1.15: .3749
x 100 111
z=
= 0.33

33.8
Table A.5 value for z = 0.33: .1293
P(100 < x < 150) = P(-0.33 < Z < 1.15) = .3749 + .1293 = .5042

(c)

= 156, = 11.4
1

Econ 4780/5640

P(X > 170)

x 170 156
z=
= 1.23

11.4
Table A.5 value for z = 1.23: .3907
P(X > 170) = P(Z > 1.23) = .5000 .3907 = .1093
3. Find the probability in each case (6 points)
a. N 1000, n 60, 75, 6; P x 76.5

b. N 90, n 36, 108, 3.46; P 107 x 107.7

Answer: (a)

N = 1000, n = 60, = 75, = 6

Prob( x < 76.5)

x
z=

N n
n N 1

76.5 75
1000 60
60 1000 1

= 2.00

From Table A.5, prob. = .4772

Prob( x < 76.5) = Prob(Z < 2) = .4772 + .5000 = .9772
(b)

N = 90, n = 36, = 108, = 3.46

Prob(107 < x < 107.7)
x
107 108
z=
= 2.23

N n 3.46 90 36
n N 1
36 90 1
From Table A.5, prob. = .4871
x
107.7 108
z=
= 0.67

N n 3.46 90 36
n N 1
36 90 1
From Table A.5, prob. = .2486
Prob(107 < x < 107.7) = Prob(-2.23 < Z < -0.67) = .4871 .2486 = .2385

4. A given population is 0.25. For the given value of n, what is the probability of getting
each of the following sample proportions (6 points)
a. n 110 and p 0.21
b. n 33 and p 0.24
c. n 59 and 0.24 p 0.27
Answer: p = .25
(a)

n = 110
2

ETX2121: Week 1 Solutions

Prob( p < .21)
p p
.21 .25
z=
= 0.97

pq
(.25)(.75)
n
110
From Table A.5, prob. = .3340
Prob( p < .21) = Prob(Z < -0.97) = .5000 .3340 = .1660

(b)

n = 33
Prob( p > .24)
p p
.24 .25
z=
= 0.13

pq
(.25)(.75)
n
33
From Table A.5, prob. = .0517
Prob( p > .24) = Prob(Z > -0.13) = .5000 + .0517 = .5517

(c)

n = 59
Prob(.24 < p < .27)
p p
.24 .25
z=
= 0.18

pq
(.25)(.75)
n
59
From Table A.5, prob. = .0714
p p
.27 .25
z=
= 0.35

pq
(.25)(.75)
n
59
From Table A.5, prob. = .1368
Prob(.24 < p < .27) = Prob(-0.18 < Z < 0.35) = .0714 + .1368 = .2082

5. A candy company fills a 20 ounce package of Halloween candy with individually

wrapped pieces of candy. The number of pieces of candy per package varies because
the package is sold by weight. The company wants to estimate the number of pieces per
package. Inspectors randomly sample 120 packages of this candy and count the
number of pieces in each package. They find that the sample mean number of pieces is
18.72. Assuming a population standard deviation of 0.8735, what is the point estimate
of the number of pieces per package? Construct a 99% confidence interval to estimate
the mean number of pieces per package for the population. Intuitively interpret the
confidence interval. (7 points)
Answer: n = 120

x = 18.72

= 0.8735

= 1%

Econ 4780/5640

x z / 2

= 18.72 2.576 *

0.8735
= 18.72 0.2054 = [18.51; 18.93]
120

The point estimate of the number of lollies per bag is 18.72.

The 99% confidence interval to estimate the population mean number of lollies per bag is
(88.51; 18.93).
For 99% of the time over repeated sampling, we estimate the population mean number of
lollies per bag is between 88.51 and 18.93.
6. Some fast-food chains offer a lower-priced combination meal in an effort to attract
budget conscious customers. One chain test-marketed a burger, fries, and a drink
combination for $1.71. The weekly sales volume for these meals was impressive.
Suppose the chain wants to estimate the average amount its customers spent on a meal
at their restaurant while this combination offer was in effect. An analyst gathers data
from 28 randomly selected customers. The following data represent the sample meal
totals. (7 points)
$3.21, 5.40, 3.50, 4.39, 5.60, 8.65, 5.02, 4.20, 1.25, 7.64,
$3.28, 5.57, 3.26, 3.80, 5.46, 9.87, 4.67, 5.86, 3.73, 4.08,
$5.47, 4.49, 5.19, 5.82, 7.62, 4.83, 8.42, 9.10
Answer: n = 28

x = 5.335

s = 2.0164

df = n 1 = 28 1 = 27

90% Confidence Interval

/2 = .05

x t / 2,n1

2.0164
s
= 5.335 1.703 *
= 5.335 0.649 = [4.686, 5.984]
28
n

The 90% confidence interval to estimate the population mean price of a fast-food meal is
$(6.59; 7.15).
For 90% of the time over repeated sampling, we estimate the population mean price of a
fast-food meal is between $6.59 and $7.15.

7.

The highway department wants to estimate the proportion of vehicles on Interstate I35 between the hours of midnight and 5:00 am that are 18-wheel tractor trailers. The
estimate will be used to determine highway repair and construction considerations and
in highway patrol planning. Suppose researchers for the highway department counted
vehicles at different locations on the interstate for several nights during this time
period. Of the 3,481 vehicles counted, 927 were 18-wheelers. (7 points)
a. Determine the point estimate for the proportion of vehicles travelling Interstate 25
during this time period that are 18-wheelers;
b. Assuming that population proportion is 0.5, construct a 99% confidence interval for
the proportion of vehicles travelling Interstate 25 during this time period that are 18wheelers;

ETX2121: Week 1 Solutions

Answer: 8.29
n = 3481
x = 927
(a)

p =

x 927
= .266

n 3481

The point estimate for the proportion of vehicles travelling the Hume Highway during
this time period that are semitrailers is 0.266.

(b)

99% C.I.

p z / 2

z/2 = z.005 = 2.575

p q
(.5)(.5)
= .266 + 2.575
= .266 0.0218= [.2445; 0.2881]
n
3481

The 99% confidence interval to estimate the population proportion of vehicles

travelling the Hume Highway during the hours of midnight and 5:00 am that are
semitrailers is (0.258; 0.274).
For 99% of the time over repeated sampling, we estimate the population proportion of
vehicles travelling the Hume Highway during the hours of midnight and 5:00 am that
are semitrailers is between 25.8% and 27.4%.
8.

Suppose that in the past years the average price per square foot for warehouses in the
United States has been $322.8. A national real estate investor wants to determine
whether that figure has changed now. The investor hires a researcher who randomly
samples 49 warehouses that are for sale across the United States and finds that the
mean price per square foot is $316.7, with a standard deviation of $1.29. Assume that
prices of warehouse footage are normally distributed in population. If the researcher
uses a 5% level of significance, what statistical conclusion can be reached? (7 points)
(dont construct confidence interval)
Answer: H0: = $322.8
Ha: $322.8
Two-tailed test, /2 = .025, t,/2, n-1 = t.025,48 = 2.101
Reject H0 if t > 2.101 or t < -2.101

x 316.70 322.80

33.1
s
12.90 / 49
n

Since t = -33.1 < t.025, 48= -2.101, reject H0 at the 5% level of significance
Based on the sample, there is insufficient evidence to conclude that the average price per
square metre for warehouses has changed.
Business implication: The investor needs to think carefully before deciding to invest in
warehouse because he may not earn any profit.

Econ 4780/5640
9. 18% of U.S. based multinational companies provide an allowance for personal long
distance calls for executives living overseas, according to the Institute for International
Human Resources and the National Foreign Trade Council. Suppose a researcher
thinks that U.S. based multinational companies are having a more difficult time
recruiting executives to live overseas and that an increasing number of these
companies are providing an allowance for personal long distance calls to these
executives to ease the burden of living away from home. To test this hypothesis, a new
study is conducted by contacting 376 multinational companies. 22% of these surveyed
companies are providing an allowance for personal long-distance calls to executives
living overseas. Does the test show enough evidence to declare that a significantly
higher proportion of multinational companies provide a long-distance call allowance?
Let = %. (7 points)

Answer: n = 376

p = .22

= .01

H0: p = .18
Ha: p > .18
One-tailed test, = .01, z = z0.01 = 2.326
Reject H0 if Z > 2.326
^

p p
0.22 0.18
z

2.02
pq
0.18 0.82
n
376
Since Z = 2.02 < z0.01 = 2.326, Fail to reject H0 at the 1% level of significance
Based on the sample, there is insufficient evidence to conclude that a significantly higher
proportion of multinational companies provide a long-distance call allowance.
Business implication: The proportion of multinational companies that provide a longdistance call allowance is not high. Although these companies can save some business cost,
they may have more difficulty in recruiting executives to live overseas.

10. A saving loan averages about $100,000 in deposits per week. However, because of the
way pay periods fall, seasonality, and erratic fluctuations in the local economy,
deposits are subject to a wide variability. In the past, the variance for weekly deposits
has been about 199,996,164. In terms that make more sense to managers, the standard
deviation of weekly deposits has been $14,142. Shown here are data from a random
sample of 13 weekly deposits for a recent period. Assume weekly deposits are normally
distributed. Use these data and = % to determine whether the variance for wekly
deposits has changed. (7 points)

$93,000; 135,000; 112,000; 68,000; 46,000; 104,000;

$128,000; 143,000; 131,000; 104,000; 96,000; 71,000; 87,000.

ETX2121: Week 1 Solutions

Answer: 9.30 = .10
832,089,743.7

/2 = .05

n = 13

df = n 1 = 13 1 = 12

s2 =

H0: 2 = 199,996,164
Ha: 2 199,996,164
Two-tailed test, = .01, 2 ,n1 02.01,12 = 5.22603 and 12 ,n1 02.99,12 = 21.0261
Reject H0 if 2 > 21.0261

(n 1) s 2

12 832.1 106
49.9
200 106

Since 2 = 49.9 > 20.99, 12 = 21.0261, Reject H0 at 10% level of significance

Based on the sample, there is sufficient evidence to conclude that the variance for weekly
deposits has changed.
Business implication: The manager may need to be more careful in circulating/investing the
deposits into other funds given the change in the variance for weekly deposits.
11. Two processes in manufacturing line are performed manually: operation A and
operation B. A random sample of 50 different assemblies using operation A shows that
the sample average time per assembly is 8.05 minutes, with a population standard
deviation of 1.36 minutes. A random sample of 38 different assemblies using operation
B shows that the sample average time per assembly is 7.26 minutes, with a population
standard deviation of 1.06 minutes. For = % , is there enough evidence in these
samples to declare that operation A takes significantly longer to perform than
operation B. (7 points)

Answer: 10.10
x 1 = 8.05
1 = 1.36
n1 = 50

Operation A
x 2 = 7.26
2 = 1.06
n2 = 38

Operation B

H0: 1 2 = 0
Ha: 1 2 > 0
One-tailed test, = 0.10, z = z.10 = 1.282
Reject H0 if Z > 1.282
Z

( x1 x2 ) ( 1 2 )

n1

n2

8.05 7.26
2

1.36 1.06

50
38

0.79
3.06
0.2580

Since Z = 3.06 > z.10 = 1.282, Reject H0 at the 10% level of significance.

Econ 4780/5640
Based on the sample, there is sufficient evidence to conclude that Operation A takes
significantly longer to perform than Operation B.
Business implication: Operation A may be less productive than Operation B. The company
may need to train revise the process in the manufacturing line performed by Operation A.
12. Is there a significant difference in the gasoline mileage of a car for regular unleaded
and premium unleaded? To test this question, a researcher randomly selected 15
drivers for a study. They were to drive their cars for one month on regular unleaded
and for one month on premium unleaded gasoline. The participants drove their own
cars for this experiment. The average sample difference was 2.85 miles per gallon in
favour of the premium unleaded, and the sample standard deviation of difference was
1.9 miles per gallon. For = % , does the test show enough evidence for the
researcher to conclude that there is a significant difference in mileage between regular
unleaded and premium unleaded gasoline? Assume the differences in gasoline mileage
figures are normally distributed in the population? (7 points)

Answer: 10.30

= 0.01, n = 15, d = 1.045, sd = 0.697

H0: D = 0
Ha: D 0
df = n1 1 = 15 1 = 14
Two-tailed test and = 0.01, t/2, n -1 = t.005,14 = 2.977
Reject H0 if t > 2.977 or t < -2.977

d 0 1.045 0

5.8
0.697
sd / n
15

Since t = 5.86 > t.005,14 = 2.977, Reject H0 at the 1% level of significance.

Based on the sample, there is sufficient evidence to conclude that there is a significant
difference in fuel economy between regular unleaded and premium unleaded petrol.
Business implication: People who drive their cars on premium unleaded petrol may be able
to save on fuel consumption. The lower level of fuel consumption also contributes to
reducing environmental problems.
13. A manufacturing company produces plastic pipes that are specified to be 10 inches
long and 1/8 inch thick with an opening of 3/4 inch. These pipes are modelled on two
different machines. To maintain consistency, the company periodically randomly
selects pipes for testing. In one specific test, pipes were randomly sampled from each
machine and the lengths were measured. A statistical test was computed using Excel in
an effort to determine whether the variance for machine one 1 was significantly

ETX2121: Week 1 Solutions

greater than that for machine 2. The results are shown here. Discuss the outcome of
this test along with some of the other information given in the output. (7 points)

F test two sample for variances

Variable 1
10.03
0.02920
26
25
1.49
0.15766
1.92

Mean
Variance
Observations
df
F
P(F<=f) one tail
F critical one tail

Variable 2
9.97
0.01965
28
27

Answer: 10.74
A test of differences of the variances of the populations of the two
machines is being computed. The hypotheses are: (see the 2nd Table)
(s1)2 = 0.02920
n1 = 26

(s2)2 = 0.01965
n2 = 28

H0: 12 = 22
Ha: 12 > 22
dfnum = 26 1 = 25, dfdenom = 28 1 = 27
For a F test, = 0.05, F, df1, df2 = F0.05, 25, 27 = 1.92
Reject H0 if F > 1.96
2

s1
0.02920

1.49
2
0.01965
s2

Since F = 1.49 < F0.05, 25, 25 = 1.92 and p-value = 0.15766 > = .05, Fail to reject H0 at 5%
level of significance
Based on the sample, there is insufficient evidence to conclude that the variance of pipe
lengths for pipes produced by machine A is different from those produced machine B.
Business implication: There is no difference in the variances of pipe lengths for pipes
produced by machine A or machine B. Both machines can function similarly.
14. (7 points)
a)
b)

Explain the differences between stratified and cluster sampling.

Describe the ways in which an analyst could reduce the width of a given confidence
interval. (lower ; increase n)