QAM II

Problem Set 1
(Instructor: Gaurav Garg)

1) According to the U.S. department of Labour, private sector workers earned, on

average, $354.32 a week in 1991. A recently taken random sample of 400 private
sector workers showed that they earn, on average $362.50 a week with a standard
deviation of $72. Find the p-value for the test with an alternative hypothesis that the
current mean weekly salary of private sector workers is different from $354.32. Give
your conclusion at 5% level of significance.

2) The lottery commissioner's office in a state wanted to find if the percentage of men
and women who play the lottery often are different. A sample of 500 men showed
that 165 of them play the lottery often. Another sample of 300 women showed that
69 of them play the lottery often. Construct a 99% confidence interval for the
difference between the proportions of all men and women who play the lottery often.

3) Obtain 95% CI estimate no. of smokers in the IIML campus. Total population is 1500.
A sample of 100 has 30 smokers.

4) 100 fish are caught from a lake. They were marked and dropped back to the lake.
After some time, when those fish were well mixed with other fish, another sample of
100 fish was taken. This sample has 15 marked fish. Obtain 95% CI estimate no. of
fish in a lake.

5) According to McKinsey Global Institute, the mean annual output per worker is
$49,600 in the United States. Assume that the mean output for all workers in the
United States is $49,600 and its standard deviation is $7000. Let two independent
samples of sizes 900 and 700 workers be selected from United States. Find sampling
x
distributions of x 1 , x 2 , and ( 1x 2) .

6) A telephone company plans to ascertain the conditions of telephone poles in the

region it services and the cost of their repair. There are altogether 10000 poles, a list
of which is maintained by the company. From this list in a pilot survey, a simple
random sample of 100 poles was selected without replacement. Crews were sent out
to examine the conditions of the poles selected, and to calculate the cost of needed
repairs. The results of the inspection were as follows: sample average repair cost =
Rs. 830; sample standard deviation of repair cost = Rs. 110. How many poles must
be sampled if the estimate of the total cost of repairing all telephone poles is to be
within Rs. 100000 of the true total cost with probability 90%?

7) Municipal board of a city wants to get the 15,000 faulty street lights of the city
repaired. In order to get the work done by a private contractor, it wishes to estimate
the total expenditure. A pilot sample of 100 lights was collected which yielded an
average repair cost of Rs. 1250 with a standard deviation of Rs. 250. What should be
the appropriate sample size to obtain a reasonably good estimate of total
expenditure within Rs. 250,000 of the true total cost with probability 90%?

8) A quality characteristic of interest for tea-bag-filling process is the weight of the tea
in the individual bags. If the bags are under filled, two problems arise. First,
customers may not be able to brew the tea to be as strong as they wish. Second, the
company may be in violation of the truth-in-labelling laws. For this product, the label
weight on the package indicates that, on an average, there are 5.5 grams of tea in a

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 bag. If the mean amount of tea in a bag exceeds the label weight, the company is
giving away product. Getting an exact amount of tea in a bag is problematic because
of variation in the temperature and humidity inside the factory, differences in the
density of the tea, and extremely fast filling operation of the machine (approximately
170 bags per minute). The data given below provide the weight, in grams, of a
sample of 50 tea bags produced in one hour by a single machine:
5.65 5.44 5.42 5.40 5.53 5.34 5.54 5.45 5.52 5.41
5.57 5.40 5.53 5.54 5.55 5.62 5.56 5.46 5.44 5.51
5.47 5.40 5.47 5.61 5.53 5.32 5.67 5.29 5.49 5.55
5.77 5.57 5.42 5.58 5.58 5.50 5.32 5.50 5.53 5.58
5.61 5.45 5.44 5.25 5.56 5.63 5.50 5.57 5.67 5.36
From this sample data, the management of the company is interested to ascertain
that mean weight of a tea bag is 5.5 grams. What decision rule should the analyst
adopt if the company is willing to take 1% risk of committing an error by concluding
that mean weight of a tea bag is different from 5.5 grams whereas actually it is 5.5
grams?

9) The Consumer Fraud Council claims that Skippy Foods does not put the required
weight of peanut butter in its 100 grams jar. In order to prove the claim the Council
studied a sample of 25 jars and found the average amount of peanut butter as 98
grams with a standard deviation of 4 grams. Using the sample, can the Council prove
their claim? Explain using the concept of Statistical Hypothesis. Skippy Foods
requests the Council to take a bigger sample and provides 25 more jars of 100 grams
peanut butter. Now the average amount of bigger sample is 99.5 grams with a
standard deviation of 8 grams. Using this bigger sample, can the Council prove their
claim? Explain the change in the conclusions suggested by two samples.

10) ATMs must be stocked with enough cash to satisfy customers making
withdrawals over an entire weekend. But if too much cash is unnecessarily kept in
the ATMs, the bank is forgoing the opportunity to invest the money and earning
interest. At a particular ATM in a colony, the average cash withdrawal per customer
over last 5 years during weekends is Rs. 1000 with a standard deviation of Rs. 1900.
In order to decide if there is any requirement to increase the cash stocked in the ATM,
a sample of 130 customers is collected. Sample observations are summarized below:
Cash Withdrawal (Rs.) No. of Customers
0 500 5
500 1000 11
1000 1500 12
1500 2000 15
2000 3000 30
3000 4000 25
4000 5000 20
5000 10000 12
Sample Mean = 3025, Sample Standard Deviation= 1872.
Since standard deviation of above sample is very close to the standard deviation of
the past 5 years population, it seems that the difference is because of sampling
fluctuation only. So, we consider that population variance is still the same. Looking at
the value of sample mean, it seems that average withdrawal has become threefold.
Using the concept of hypothesis testing, examine this claim. Sample is large enough
to assume normality of the observations. Use 5% level of significance.

11) Blue Ray Disk Players are getting popular. Tony Inc., a well-known
manufacturer of Blue Ray Disk Players, claims that at least 5% upper middle class
households in the metro cities of India have a Blue Ray Disk Player. Audiocon Ltd., a
manufacturer of DVD players, not manufacturing Blue Ray Disk Players, claims that
DVD players are still very popular and there is no significant market for Blue Ray Disk
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 Players. In order to disprove the claim of Tony Inc., officials at Audiocon Ltd. collected
a sample of 120 upper middle class households and found that only 5 households in
the sample have Blue Ray Disk Players. Using the sample and Prob {reject the claim
of Tony Inc. given that it is true} = 0.05, can the officials of Audiocon Ltd. prove the
claim of Tony Inc. as wrong? Help them using the concept of p value.

12) One of the few negative effects of quitting smoking is weight gain. Suppose that the
weight gain in the 12 months following a cessation in smoking is normally distributed
with a standard deviation of 6 pounds. To estimate the mean weight gain a random
sample of 13 quitters was taken and their gain in weights (in pounds) are listed here:
16 23 8 2 14 22 18 11 10 19 5 8 15
Determine the 90% confidence interval estimate of the mean 12-months weight gain
for all quitters.

13) In the last election a state representative received 52% of the votes cast. One
year after the election the representative organized a survey that asked a random
sample of 300 people whether they would vote for him in the next election. If we
assume that his popularity has not changed, what is the probability that more than
half of the sample would vote for him?

14) A soft drink manufacturer is to decide about launching a new variety of soft
drink. On the basis of his past experience, he believed that at least 80% of the
customers would like the new product. In order to decide about the launching of the
new product, the manufacturer collects the opinion of 400 customers selected by
means of random sampling scheme. He further frames the decision rule of rejecting
the hypothesis of 0.8 in favour of the alternative < 0.8 if 308 or less customers
favour the new product. Thus, the new product would not be launched if on the basis
of sample it is concluded that < 0.8. Calculate the probability of concluding that less
than 80% of the customers would like the new product when actually 80% of the
customers like the new product. Also, calculate the probability of concluding that at
least 80% of the customers would like the new product when actually 70% of the
customers like the new product.

15) A market research group wishes to estimate the average number of customers
visiting a supermarket per day in the month of December 2011. The group wants
that its estimated value to be within 5% of the actual value with a probability of 0.95.
The earlier studies indicated that the coefficient of variation of the number of
customers visiting the supermarket in the given month was 24%. The cost of
collection of data is Rs. 125/- per day. Without ignoring finite population correction,
calculate the cost involved in estimating the required value. If the research group
decides to settle for an estimate with a probability of 0.90, how much reduction in
cost can be achieved?

16) A pharmaceutical manufacturer is concerned that the impurity concentration

in pills on an average does not exceed 3%. It is known from a particular run that
impurity concentration follow normal distribution with standard deviation of 0.4%. A
random sample of 64 pills from a production run was checked and the sample mean
impurity was found to be 3.07%. Help the manufacturer in testing the appropriate
hypotheses using p-value approach. Obtain power of a 5% level test when true
mean impurity concentration is actually 3.10%.

17) Some quality control experiments require destructive sampling. The test to
determine whether the item is defective destroys the item. The cost of destructive
sampling often dictates small samples. For example, suppose a manufacturer of
printers for personal computers wishes to estimate the mean number of characters

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 printed before the print-head fails. Suppose the printer manufacturer tests n = 15
randomly selected print-heads and records the number of characters printed until
failure for each. These 15 measurements (in millions of characters) are listed below
followed by EXCEL summary statistics:

Mean 1.2387
Standard Error 0.0499
Median 1.25
Mode #N/A
Standard Deviation 0.1932
Sample Variance 0.0373
Kurtosis 0.0636
Skewness -0.4913
Range 0.7
Minimum 0.85
Maximum 1.55
Sum 18.58
Count 15

Making the appropriate assumptions, form a 99% confidence interval for the mean
number of characters printed before the print-head fails. If population standard
deviation is known as 0.2, form a 99% confidence interval for the mean number of
characters printed before the print-head fails. Compare the width of the two
confidence intervals.

18) A company services home air conditioners. It has been found that times for
service calls follow a normal distribution with mean 60 minutes and standard
deviation 10 minutes. A random sample of 4 service calls was taken. What is the
probability that the sample mean service time is more than 65 minutes?What is the
probability that more than two calls in the sample take more than 65 minutes?

19) Suppose 40% Lucknowites have enjoyed Tundes Kebab at least once. If a
random sample of size 300 is drawn from the population, what is the probability that
44% or fewer in the sample have enjoyed Tundes Kebab at least once?

20) A carload of steel rods has arrived at Cybermatic Construction Company. The
car contains 50,000 rods. Claude Ong, manager of Quality Assurance, directs his
crew measure the lengths of 100 randomly selected rods. If the population of rods
has a mean length of 120 inches and a standard deviation of 0.05 inch, what is the
probability that Claude's sample has a mean between 119.985 and 120.0125 inches?

21) Albert Abbasi, VP of Operations at Ingleside International Bank, is evaluating

the service level provided to walkin customers. Accordingly, he plans a sample of
waiting times for walkin customers. If the population of waiting times has a mean of
15 minutes and a standard deviation of 4 minutes, what is the probability that
Albert's sample of 64 will have a mean less than 14 minutes?

22) Pinky Bauer, Chief Financial Officer of Harrison Haulers, Inc., suspects
irregularities in the pay roll system. If 10% of the 5,000 payroll vouchers issued since

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 January 1, 2000, have irregularities, what is the probability that Pinky's random
sample of 200 vouchers will have a sample proportion of between .06 and .14?

23) Catherine Chao, Director of Marketing Research, needs a sample of Kansas

City households to participate in the testing of a new toothpaste package. If 40% of
the households in Kansas City prefer the new package, what is the probability that
Catherine's random sample of 300 households will have a sample proportion
between 0.35 and 0.45?

24) Brian Vanecek, VP of Operations at Portland Trust Bank, is evaluating the

service level provided to walkin customers. Accordingly, his staff recorded the
waiting times for 64 randomly selected walkin customers and determined that their
mean waiting time was 15 minutes. Assuming the population standard deviation to
be 4 minutes, construct 90% confidence interval for the population mean of waiting
times.

25) Elwin Osbourne, CIO at GFS, Inc., is studying employee use of GFS email for
nonbusiness communications. A random sample of 200 email messages was
selected. Thirty of the messages were not business related. Construct 90%
confidence interval for the population proportion.

26) Brian Vanecek, VP of Operations at Portland Trust Bank, is evaluating the

service level provided to walkin customers. Brian would like to minimize the variance
of waiting time for these customers, since this would mean each customer received
the same level of service. Accordingly, his staff recorded the waiting times for 15
randomly selected walkin customers, and determined that their mean waiting time
was 15 minutes and that the standard deviation was 4 minutes. Assuming normal
distribution, construct 95% confidence interval for the population variance of waiting
times.

27) If X1, X2, , Xn is a random sample from a N(, ) population, write the
distribution of following statistics:
2
X 1
a. ( )
7

( X i )2
(n7) i =1
b. n
, n>7
7 2
( X i )
i=8

( X 1 X 2)2
c.
2 2

( X 1X 2 )2
d. ( X 3 X 4 )2

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28) A coin was tossed 400 times and the head turned up 216 times. Test at 5%
level of significance that the coin is unbiased.

29) A person throws 10 fair dice 500 times and obtains 2560 times 4, 5 or 6. Can
this be attributed to fluctuations of sampling?

30) In a hospital 480 female and 520 male babies were born in a week. Does this
figure confirm the hypothesis that males and females are born in equal number?

31) In a big city 325 men out of 600 men were found to be selfemployed. Does
this information support the conclusion that the majority of men in this city are self
employed?

32) A machine puts out 16 imperfect articles in a sample of 500. After machine is
overhauled, it puts out 3 imperfect articles in a batch of 100. Has the machine
improved?

33) It is claimed that a random sample of 100 tires with a mean life of 15269kms
is drawn from a population of tires which has a mean life of 15200 kms and a
standard deviation of 1248 kms. Test the validity of the claim.

34) A company producing light bulbs finds that mean life span of the population of
bulbs is 1200 hrs with a standard deviation of 125hrs. A sample of 100 bulbs
produced in a lot is found to have a mean life span of 1150hrs. Test whether the
difference between the population and sample means is statistically significant at 5%
level of significance.

35) A manufacturing company produces bearings. One line of bearings is specified

to be 1.64 cm in diameter. A major customer requires that the variance of the
bearings be no more than 0.001 cm square. The producer is required to test the
bearings before they are shipped, and so the diameters of 16 bearings are measured
with a precise instrument, resulting in the following values:
1.69 1.62 1.63 1.70 1.66 1.63 1.65 1.71 1.64 1.69 1.57 1.64
1.59 1.66 1.63 1.65
Assume bearing diameters are normally distributed. Use the data and =0.01 to test
the data to determine whether the population of these bearings is to be rejected
because of too high variance.

36) A small business has 37 employees. Because of the uncertain demand for its
product, the company usually pays overtime on any given week. The company
assumed that about 50 total hours of overtime per week is required and that the
variance on this figure is about 25. Company officials want to know whether the
variance of overtime hours has changed. Given here is a sample of 16 weeks of
overtime data (in hours per week). Assuming hours of overtime are normally
distributed, can you help company officials?
57 56 52 44 46 53 44 44 48 51 55 48
63 53 51 50
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37) A political researcher wants to prove that a candidate is currently carrying
more than 60% of the vote in the state. She has her assistants randomly sample 200
eligible voters in the state by telephone and only 90 declare that they support her
candidate. Help the researcher in making conclusions.

38) The diameter of 3.5 inch diskettes is normally distributed. Periodically, quality
control inspectors at Dallas Diskettes randomly select a sample of 16 diskettes. If
the mean diameter of the diskettes is too large or too small the diskette punch is
shut down for adjustment; otherwise, the punching process continues. The last
sample showed a mean and standard deviation of 3.55 and 0.08 inches, respectively.
Using = 0.05, make the appropriate decision.

39) The executives of XYZ Insurance, Inc. feel that "a majority of our employees
perceive a participatory management style at XYZ." A random sample of 200 XYZ
employees is selected to test this hypothesis at the 0.05 level of significance. Eighty
employees rate the management as participatory. What is the appropriate decision?

40) ABC Components, Inc. manufactures a line of electrical resistors. Presently,

the carbon composition line is producing 100 ohm resistors. The population variance
of these resistors "must not exceed 4" to conform to industry standards.
Periodically, the quality control inspectors check for conformity by randomly select
10 resistors from the line, and calculating the sample variance. The last sample had
a variance of 4.36. Assume that the population is normally distributed. Using =
0.05, make the appropriate decision.

41) David D., VP of Human Resources of American First Banks (AFB), is reviewing
the employee training programs of AFB banks. Based on a recent census of
personnel, David knows that the variance of teller training time in the Southeast
region is 8, and he wonders if the variance in the Southwest region is the same
number. His staff randomly selected personnel files for 15 tellers in the Southwest
Region, and determined that their mean training time was 25 hours and that the
standard deviation was 4 hours. Assume that teller training time is normally
distributed in the population. Using = 0.10, help David to make the appropriate
decision.

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