Test Bank Statistics For Management & Economics 9th Edition Gerald Keller

Test Bank Statistics For Management &
Economics 9th Edition Gerald Keller
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SAMPLE
CHAPTER 6 SECTION 1-6

SECTION 1: PROBABILITY
TRUE/FALSE
1. The relative frequency approach to probability uses long term frequencies, often based on past data.
ANS: T PTS: 1 REF: SECTION 6.1

NAT: Analytic; Probability Concepts
2. Predicting the outcome of a football game is using the subjective approach to probability.

3. You think you have a 90% chance of passing your next advanced financial accounting exam. This is an
example of subjective approach to probability.

4. P(A) + P(B) = 1 for any events A and B that are mutually exclusive.
ANS: F PTS: 1 REF: SECTION 6.1

5. The collection of all the possible outcomes of a random experiment is called a sample space.

6. If events A and B cannot occur at the same time, they are called mutually exclusive.
7. If either event A or event B must occur, they are called mutually exclusive.

8. If either event A or event B must occur, then A and B are mutually exclusive and collectively exhaustive
events.

9. If P(A) = 0.4 and P(B) = 0.6, then A and B must be collectively exhaustive.

10. If P(A) = 0.4 and P(B) = 0.6, then A and B must be mutually exclusive.

MULTIPLE CHOICE
11. Of the last 500 customers entering a supermarket, 50 have purchased a wireless phone. If the relative
frequency approach for assigning probabilities is used, the probability that the next customer will
purchase a wireless phone is
a. 0.10
b. 0.90
c. 0.50
d. None of these choices.
ANS: A PTS: 1 REF: SECTION 6.1

12. If A and B are mutually exclusive events with P(A) = 0.75, then P(B):
a. can be any value between 0 and 1.
b. can be any value between 0 and 0.75.
c. cannot be larger than 0.25.
d. equals 0.25.
ANS: C PTS: 1 REF: SECTION 6.1

13. If you roll a balanced die 50 times, you should expect an even number to appear:
a. on every other roll.
b. exactly 50 times out of 100 rolls.
c. 25 times on average, over the long term.
d. All of these choices are true.
ANS: D PTS: 1 REF: SECTION 6.1
14. An approach of assigning probabilities which assumes that all outcomes of the experiment are equally
likely is referred to as the:
a. subjective approach
b. objective approach
c. classical approach
d. relative frequency approach

15. The collection of all possible outcomes of an experiment is called:

a. a simple event
b. a sample space
c. a sample
d. a population
ANS: B PTS: 1 REF: SECTION 6.1

16. Which of the following is an approach to assigning probabilities?

a. Classical approach
b. Relative frequency approach
c. Subjective approach

17. A sample space of an experiment consists of the following outcomes: 1, 2, 3, 4, and 5. Which of the
following is a simple event?
a. At least 3
b. At most 2
c. 3
d. 15

18. Which of the following is a requirement of the probabilities assigned to outcome Oi?
a. P(Oi) ≤ 0 for each i
b. P(Oi) ≥ 1 for each i
c. 0 ≤ P(Oi) ≤ 1 for each i
d. P(Oi) = 1 for each i

19. If an experiment consists of five outcomes with P(O1) = 0.10, P(O2) = 0.20, P(O3) = 0.30, P(O4) =
0.25, then P(O5) is
a. 0.75
b. 0.15
c. 0.50
d. Cannot be determined from the information given.

20. If two events are collectively exhaustive, what is the probability that one or the other occurs?
a. 0.00
b. 0.50
c. 1.00

21. If two events are collectively exhaustive, what is the probability that both occur at the same time?
a. 0.00
b. 0.50
c. 1.00

22. If two events are mutually exclusive, what is the probability that one or the other occurs?
a. 0.00
b. 0.50
c. 1.00

23. If two events are mutually exclusive, what is the probability that both occur at the same time?
a. 0.00
b. 0.50
c. 1.00

24. If two events are mutually exclusive and collectively exhaustive, what is the probability that both
occur?
a. 0.00
b. 0.50
c. 1.00

25. If the two events are mutually exclusive and collectively exhaustive, what is the probability that one or
the other occurs?
a. 0.00
b. 0.50
c. 1.00

26. If events A and B are mutually exclusive and collectively exhaustive, what is the probability that event
A occurs?
a. 0.25
b. 0.50
c. 1.00

27. If two equally likely events A and B are mutually exclusive and collectively exhaustive, what is the
probability that event A occurs?
a. 0.00
b. 0.50
c. 1.00

28. If event A and event B cannot occur at the same time, then A and B are said to be
a. mutually exclusive
b. independent
c. collectively exhaustive

29. The collection of all possible events is called

a. an outcome
b. a sample space
c. an event

COMPLETION
30. A random experiment is an action or process that leads to one of several possible
____________________.
ANS: outcomes
PTS: 1 REF: SECTION 6.1

31. The outcomes of a sample space must be ____________________, which means that all possible
outcomes must be included.
ANS: exhaustive

32. The outcomes of a sample space must be ____________________, which means that no two
outcomes can occur at the same time.
ANS: mutually exclusive

33. A(n) ____________________ of a random experiment is a list of all possible outcomes of the
experiment.
ANS: sample space

34. The outcomes of a sample space must be ____________________ and ____________________.
ANS:
exhaustive; mutually exclusive
mutually exclusive; exhaustive

35. There are ____________________ requirements of probabilities for the outcomes of a sample space.
ANS:
two
2

36. An individual outcome of a sample space is called a(n) ____________________ event.
ANS: simple
37. A(n) ____________________ is a collection or set of one or more simple events in a sample space.
ANS: event

38. The probability of an event is the ____________________ of the probabilities of the simple events
that constitute the event.
ANS: sum

39. No matter which approach was used to assign probability (classical, relative frequency, or subjective)
the one that is always used to interpret a probability is the ____________________ approach.
ANS: relative frequency

SHORT ANSWER
40. Alana, Eva, and Stephanie, three candidates for the presidency of a college’s student body, are to
address a student forum. The forum’s organizer is to select the order in which the candidates will give
their speeches, and must do so in such a way that each possible order is equally likely to be selected.
a. What is the random experiment?

b. List the outcomes in the sample space.
c. Assign probabilities to the outcomes.
d. What is the probability that Stephanie will speak first?
e. What is the probability that Alana will speak before Stephanie does?
ANS:
a. The random experiment is to observe the order in which the three candidates give their speeches.
b. S = {ABC, ACB, BAC, BCA, CAB, CBA}, where A = Alana, B = Eva, and C = Stephanie.
c. The probability assigned to each outcome is 1/6.
d. P(CAB, CBA) = 1/3
e. P(ABC, ACB, BAC) = 1/2

41. There are three approaches to determining the probability that an outcome will occur: classical,
relative frequency, and subjective. For each situation that follows, determine which approach is most
appropriate.
a. A Russian will win the French Open Tennis Tournament next year.
b. The probability of getting any single number on a balanced die is 1/6.
c. Based on the past, it’s reasonable to assume the average book sales for a certain textbook is 6,500
copies per month.
ANS:
a. subjective
b. classical
c. relative frequency

NARRBEGIN: Hobby Shop Sales

Hobby Shop Sales
Sales records of a hobby shop showed the following number of radio controlled trucks sold weekly for
each of the last 50 weeks.
Number of Trucks Sold Number of Weeks

0 20
1 15
2 10
34
41
NARREND
42. {Hobby Shop Sales Narrative} Define the random experiment of interest to the store.
ANS:
The random experiment consists of observing the number of trucks sold in any given week.

43. {Hobby Shop Sales Narrative} List the outcomes in the sample space.
ANS:
S = {0, 1, 2, 3, 4}

44. {Hobby Shop Sales Narrative} What approach would you use in determining the probabilities for next
week’s sales? Assign probabilities to the outcomes.
ANS:
The relative frequency approach was used.
Number of Trucks Prob.
0 0.40
1 0.30
2 0.20
3 0.08
4 0.02

45. {Hobby Shop Sales Narrative} What is the probability of selling at least two trucks in any given week?
ANS:
P{2, 3, 4} = 0.30

46. {Hobby Shop Sales Narrative} What is the probability of selling between 1 and 3 (inclusive) trucks in
any given week?
ANS:
P{1,2,3} = 0.58

NARRBEGIN: Mutual Fund Price

Mutual Fund Price
An investor estimates that there is a 75% chance that a particular mutual fund’s price will increase to
$100 per share over the next three weeks, based past data.
NARREND
47. {Mutual Fund Price Narrative} Which approach was used to produce this figure?
ANS:
The relative frequency approach

48. {Mutual Fund Price Narrative} Interpret the 75% probability.
ANS:
We interpret the 75% figure to mean that if we had an infinite number of funds with exactly the same
economic and market characteristics as the one the investor will buy, 75% of them will increase in price to
$100 over the next three weeks.

49. The sample space of the toss of a balanced coin is S = {1, 2, 3, 4, 5, 6}. If the die is balanced, each
simple event (outcome) has the same probability. Find the probability of the following events:
a. Rolling an odd number

b. Rolling a number less than or equal to 3
c. Rolling a number greater than or equal to 5
d. Rolling a number between 2 and 5, inclusive.
ANS:
a. 3/6
b. 3/6
c. 2/6
d. 4/6

NARRBEGIN: Equity Loan Rates

Equity Loan Rates
A survey of banks estimated the following probabilities for the interest rate being charged on a equity loan
based on a 30-year loan, based on past records.
Interest Rate 6.0% 6.5% 7.0% 7.5% >7.5%

Probability 0.20 0.23 0.25 0.28 .04
NARREND
50. {Equity Loan Rates Narrative} If a bank is selected at random from this distribution, what is the
probability that the interest rate charged on a home loan exceeds 7.0%?
ANS:
0.32

51. {Equity Loan Rates Narrative} What is the most common interest rate?
ANS:
7.5%, since it occurred 28% of the time.

52. {Equity Loan Rates Narrative} What approach was used in estimating the probabilities for the interest
rates?
ANS:
relative frequency approach
CHAPTER 6 SECTION 2: PROBABILITY
TRUE/FALSE
53. The probability of the intersection is called a joint probability.

54. Two or more events are said to be independent when the occurrence of one event has no effect on
the probability that another will occur.

55. The union of events A and B is the event that occurs when either A or B or both occur. It is denoted
as ‘A or B’.

56. If A and B are independent events with P(A) = 0.35 and P(B) = 0.55, then P(A|B) is 0.35/0.55 = .64.

57. Two events A and B are said to be independent if P(A|B) = P(B).

58. The conditional probability of event B given event A is denoted by P(A|B).

59. If A and B are independent events with P(A) = .40 and P(B) = .50, then P(A and B) = .20.

60. The intersection of two events A and B is the event that occurs when both A and B occur.

61. Two events A and B are independent if P(A and B) = 0.

62. The union of events A and B is the event that occurs when either A or B occurs but not both.

63. If A and B are independent, then P(A|B) = P(A) or P(B|A) = P(B).

64. If P(A) = .30, P(B) = .60, and P(A and B) = .20, then P(A|B) = .40.

65. Suppose the probability that a person owns both a cat and a dog is 0.10. Also suppose the probability
that a person owns a cat but not a dog is 0.20. The marginal probability that someone owns a cat is 0.30.

MULTIPLE CHOICE
66. The probability of the intersection of two events A and B is denoted by P(A and B) and is called the:
a. marginal probability
b. joint probability
c. conditional probability of A given B
d. conditional probability of B given A

67. The intersection of events A and B is the event that occurs when:
a. either A or B occurs but not both
b. neither A nor B occur
c. both A and B occur

68. The probability of event A gives event B is denoted by

a. P(A and B)
b. P(A or B)
c. P(A|B)
d. P(B|A)

69. Which of the following is equivalent to P(A|B)?

a. P(A and B)
b. P(B|A)
c. P(A)/P(B)

70. Which of the following best describes the concept of marginal probability?
a. It is a measure of the likelihood that a particular event will occur, regardless of whether another event
occurs.
b. It is a measure of the likelihood that a particular event will occur, if another event has already occurred.
c. It is a measure of the likelihood of the simultaneous occurrence of two or more events.

71. If two events are independent, what is the probability that they both occur?
a. 0
b. 0.50
c. 1.00
d. Cannot be determined from the information given

72. If the outcome of event A is not affected by event B, then events A and B are said to be
a. mutually exclusive
b. independent
c. collectively exhaustive

73. If A and B are disjoint events with P(A) = 0.70, then P(B):
a. can be any value between 0 and 1
b. can be any value between 0 and 0.70
c. cannot be larger than 0.30
d. cannot be determined with the information given

74. If P(A) = 0.65, P(B) = 0.58, and P(A and B) = 0.76, then P(A or B) is:
a. 1.23
b. 0.47
c. 0.18
d. 0.11

75. Suppose P(A) = 0.60, P(B) = 0.85, and A and B are independent. The probability of the complement
of the event (A and B) is:
a. .15 = .060.4
b. 0.40 + .15 = .55
c. 1 − (.40 + .15) = .45
d. .85) = .4901 − (.6

76. Which of the following statements is correct if the events A and B have nonzero probabilities?
a. A and B cannot be both independent and disjoint
b. A and B can be both independent and disjoint
c. A and B are always independent
d. A and B are always disjoint

77. A and B are disjoint events, with P(A) = 0.20 and P(B) = 0.30. Then P(A and B) is:
a. 0.50
b. 0.10
c. 0.00
d. 0.06

78. If P(A) = 0.35, P(B) = 0.45, and P(A and B) = 0.25, then P(A|B) is:
a. 1.4
b. 1.8
c. 0.714
d. 0.556

79. If A and B are independent events with P(A) = 0.60 and P(A|B) = 0.60, then P(B) is:
a. 1.20
b. 0.60
c. 0.36
d. cannot be determined with the information given

80. If A and B are independent events with P(A) = 0.20 and P(B) = 0.60, then P(A|B) is:
a. 0.20
b. 0.60
c. 0.40
d. 0.80
81. If P(A) = 0.25 and P(B) = 0.65, then P(A and B) is:
a. 0.25
b. 0.40
c. 0.90
d. cannot be determined from the information given

NARRBEGIN: Pets
Cars
Suppose X = the number of cars owned by a family in the U.S. The probability distribution of X is shown
in the table below.
X0123
Probability 0.56 0.23 0.12 0.09
NARREND
82. {Car Narrative}What is the chance that a family owns more than one car?
a. 0.23
b. 0.21
c. 0.44

83. {Cars Narrative} Suppose you choose two families at random. What is the chance that they each own
one car? (That means family A owns a car and family B owns a car.)
a. 0.23
b. 0.23 + 0.23 = 0.46
c. 0.23 + 0.23 − (0.23)*(0.23) = .4071
d. (0.23)*(0.23) = 0.0529

COMPLETION
84. The ____________________ of events A and B is the event that occurs when both A and B occur.
ANS: intersection

85. The probability of an intersection of two events is called a(n) ____________________ probability.
ANS: joint

86. Suppose two events A and B are related. The ____________________ probability of A is the
probability that A occurs, regardless of whether event B occurred or not.
ANS: marginal

87. If two events are mutually exclusive, their joint probability is ____________________.
ANS:
zero
0

88. A conditional probability of A given B is written in probability notation as ____________________.
ANS: P(A|B)

89. If A and B are independent, then P(A|B) = ____________________.
ANS: P(A)

90. The ____________________ of two events A and B is the event that occurs when either A or B or
both occur.
ANS: union

91. If A and B are mutually exclusive, their joint probability is ____________________.
ANS:
0
zero

92. P(A|B) is the conditional probability of ____________________ given ____________________.
ANS: A; B

93. If P(A|B) = P(A) then events A and B are ____________________.
ANS: independent

SHORT ANSWER
NARRBEGIN: Tea and Seltzer

Tea and Seltzer
Suppose 55 percent of adults drink tea, 45 percent drink seltzer, and 10 percent drink both.
NARREND
94. {Tea and Seltzer Narrative} What is the probability that a randomly chosen adult does not drink
seltzer?
ANS:
.55

95. {Tea and Seltzer Narrative} What is the probability that a randomly chosen adult drinks seltzer or tea
or both?
ANS:
.90

96. {Tea and Seltzer Narrative} What is the probability that a randomly chosen adult doesn’t drink tea or
seltzer?
ANS:
.10

NARRBEGIN: Club Members

Club Members
A survey of a club’s members indicates that 50% own a home, 80% own a car, and 90% of the
homeowners who subscribe also own a car.
NARREND
97. {Club Members Narrative} What is the probability that a subscriber owns both a car and a house?
ANS:
.45

98. {Club Members Narrative} What is the probability that a club member owns a car or a house, or both?
ANS:
.85

99. {Club Members Narrative} What is the probability that a club member owns neither a car nor a house?
ANS:
.15

NARRBEGIN: Business Majors

Business Majors
Suppose 30% of business majors major in accounting. You take a random sample of 3 business majors.
NARREND
100. {Business Majors Narrative} What is the chance that they all major in accounting?
ANS:
.027

101. {Business Majors Narrative} What is the chance that at least one majors in accounting?
ANS:
.657

102. {Business Majors Narrative} What is the chance that exactly one majors in accounting?
ANS:
.441

103. {Business Majors Narrative} What is the chance that none of them major in accounting?
ANS:
.343

NARRBEGIN: Drunk Drivers

Drunk Drivers
Five hundred accidents that occurred on a Saturday night were analyzed. Two items noted were the
number of vehicles involved and whether alcohol played a role in the accident. The numbers are shown
below:
Number of Vehicles Involved

Did alcohol play a role? 1 2 3 Totals
Yes 75 125 50 250
No 50 225 75 350
Totals 125 350 125 600
NARREND
104. {Drunk Drivers Narrative} What proportion of accidents involved more than one vehicle?
ANS:
475/600 or .79

105. {Drunk Drivers Narrative} What proportion of accidents involved alcohol and single vehicle?
ANS:
75/600 or ..125

106. {Drunk Drivers Narrative} What proportion of accidents involved alcohol or a single vehicle?
ANS:
300/600 or .50

107. {Drunk Drivers Narrative} Given alcohol was involved, what proportion of accidents involved a single
vehicle?
ANS:
75/250 or .30

108. {Drunk Drivers Narrative} If multiple vehicles were involved, what proportion of accidents involved
alcohol?
ANS:
175/475 or .37

109. {Drunk Drivers Narrative} If 3 vehicles were involved, what proportion of accidents involved alcohol?
ANS:
50/125 or .40

110. {Drunk Drivers Narrative} If alcohol was not involved, what proportion of the accidents were single
vehicle?
ANS:
50/350 or .142

111. {Drunk Drivers Narrative} If alcohol was not involved, what proportion of the accidents were multiple
vehicle?
ANS:
300/350 or .857

112. Suppose A and B are two independent events for which P(A) = 0.20 and P(B) = 0.60.
a. Find P(A|B).
b. Find P(B|A).
ANS:
a. 0.20
b. 0.60

NARRBEGIN: GPA and Class

GPA and Class
A college professor classifies his students according to their grade point average (GPA) and their class
rank. GPA is on a 0.0-4.0 scale, and class rank is defined as the under class (freshmen and sophomores)
and the upper class (juniors and seniors). One student is selected at random.
GPA
Class Under 2.0 2.0 – 3.0 Over 3.0
Under 0.05 0.25 0.10
Upper 0.10 0.30 0.20
NARREND
113. {GPA and Class Narrative} If the student selected is in the upper class, what is the probability that
her GPA is between 2.0 and 3.0?
ANS:
0.50

114. {GPA and Class Narrative} If the GPA of the student selected is over 3.0, what is the probability that
the student is in the lower class?
ANS:
0.333

115. {GPA and Class Narrative} What is the probability that the student is in the upper class?
ANS:
0.60

116. {GPA and Class Narrative} What is the probability that the student has GPA over 3.0?
ANS:
0.30
117. {GPA and Class Narrative} What is the probability that the student is in the lower class?
ANS:
0.40

118. {GPA and Class Narrative} What is the probability that the student is in the lower class and has GPA
over 3.0?
ANS:
0.10

119. {GPA and Class Narrative} What is the probability that the student is in the upper class and has GPA
under 2.0?
ANS:
10

120. {GPA and Class Narrative} Are being in the upper class and having a GPA over 3.0 related? Explain.
ANS:
Yes, since the product of the probabilities of the two events is not equal to the joint probability.

NARRBEGIN: Marital Status

Marital Status
An insurance company has collected the following data on the gender and marital status of 600
customers.
Marital Status
Gender Single Married Divorced
Male 50 250 30
Female 100 100 40
Suppose that a customer is selected at random.

NARREND
121. {Marital Status Narrative} Develop the joint probability table.

ANS:

Male .083 .417 .100
Female .167 .167 .067

122. {Marital Status Narrative} Find the probability that the customer selected is a married female.
ANS:
0.167

123. {Marital Status Narrative} Find the probability that the customer selected is
a. female and single

b. married if the customer is male.
c. not single
ANS:
a. 0.167
b. 0.695
c. 0.750

NARRBEGIN: Financial Consultants

Financial Consultants
A Financial Consultant has classified his clients according to their gender and the composition of their
investment portfolio (primarily bonds, primarily stocks, or a balanced mix of bonds and stocks). The
proportions of clients falling into the various categories are shown in the following table:
Portfolio Composition
Gender Bonds Stocks Balanced
Male 0.18 0.20 0.25
Female 0.12 0.10 0.15
One client is selected at random, and two events A and B are defined as follows:
A: The client selected is male.
B: The client selected has a balanced portfolio.
NARREND
124. {Financial Consultants Narrative} Find the following probabilities:

a. P(A)
b. P(B)
ANS:
a. 0.63
b. 0.40

125. {Financial Consultants Narrative} Express each of the following events in words:
a. A or B
b. A and B
ANS:
a. The client selected either is male or has a balanced portfolio or both.

b. The client selected is male and has a balanced portfolio.

126. {Financial Consultants Narrative} Find P(A and B).
ANS:
0.25

127. {Financial Consultants Narrative} Express each of the following probabilities in words:
a. P(A|B)
b. P(B|A)
ANS:
a. The probability that the client selected is male, if the client has a balanced portfolio.
b. The probability that the client selected has a balanced portfolio, if the client is male.

128. {Financial Consultants Narrative} Find the following probabilities:
a. P(A|B)
b. P(B|A)
ANS:
a. 0.625
b. 0.3968

CHAPTER 6 SECTION 3: PROBABILITY
TRUE/FALSE
129. Julius and Gabe go to a show during their Spring break and toss a balanced coin to see who will pay
for the tickets. The probability that Gabe will pay three days in a row is 0.125.

130. If events A and B have nonzero probabilities, then they can be both independent and mutually
exclusive.

131. If the event of interest is A, the probability that A will not occur is the complement of A.

132. Assume that A and B are independent events with P(A) = 0.30 and P(B) = 0.50. The probability that
both events will occur simultaneously is 0.80.

133. Two events A and B are said to be independent if P(A) = P(A|B).

134. When A and B are mutually exclusive, P(A or B) can be found by adding P(A) and P(B).

135. Two events A and B are said to be independent if P(A|B) = P(B).

136. If A and B are two independent events with P(A) = 0.9 and P(B|A) = 0.5, then P(A and B) = 0.45.

137. Two events A and B are said to be independent if P(A|B) = P(B|A).

138. The probability of the union of two mutually exclusive events A and B is 0.

139. Two events A and B are said to be mutually exclusive if P(A and B) = 1.0.

140. If P(A and B) = 1, then A and B must be mutually exclusive.

141. Events A and B are either independent or mutually exclusive.

142. If P(B) = .7 and P(B|A) = .4, then P(A and B) must be .28.

143. If P(B) = .7 and P(A|B) = .7, then P(A and B) = 0.

MULTIPLE CHOICE
144. If the events A and B are independent with P(A) = 0.35 and P(B) = 0.45, then the probability that
both events will occur simultaneously is:
a. 0
b. 0.16
c. 0.80
d. Not enough information to tell.

145. Two events A and B are said to be mutually exclusive if:

a. P(A|B) = 1
b. P(A|B) = P(A)
c. P(A and B) =1
d. P(A and B) = 0
146. If P(A) = 0.84, P(B) = 0.76, and P(A or B) = 0.90, then P(A and B) is:
a. 0.06
b. 0.14
c. 0.70
d. 0.83

147. Which of the following statements is always correct?

a. P(A and B) = P(A) * P(B)
b. P(A or B) = P(A) + P(B)
c. P(A) = 1 − P(Ac)

148. If P(A) = 0.20, P(B) = 0.30, and P(A and B) = 0, then A and B are:
a. dependent events
b. independent events
c. mutually exclusive events
d. complementary events

149. If P(A) = 0.65, P(B) = 0.58, and P(A and B) = 0.76, then P(A or B) is:
a. 1.23
b. 0.47
c. 0.24

150. Suppose P(A) = 0.30. The probability of the complement of A is:

a. 0.30
b. 0.70
c. −0.30

151. If events A and B are independent then:

a. P(A and B) = P(A) * P(B)
b. P(A and B) = P(A) + P(B)
c. P(B|A) = P(A)
152. If A and B are mutually exclusive events, with P(A) = 0.20 and P(B) = 0.30, then the probability that
both events will occur simultaneously is:
a. 0.50
b. 0.06
c. 0

153. If A and B are independent events with P(A) = 0.60 and P(B) = 0.70, then P(A or B) equals:
a. 1.30
b. 0.88
c. 0.42
d. Cannot tell from the given information.

154. If A and B are mutually exclusive events with P(A) = 0.30 and P(B) = 0.40, then P(A or B) is:
a. 0.10
b. 0.12
c. 0.70
d. None of these choices

155. If A and B are any two events with P(A) = .8 and P(B|A) = .4, then P(A and B) is:
a. .40
b. .32
c. 1.20

156. If A and B are any two events with P(A) = .8 and P(B|Ac) = .7, then P(Ac and B) is
a. 0.56
b. 0.14
c. 1.50

COMPLETION
157. The ____________________ rule says that P(Ac) = 1 − P(A).

ANS: complement

158. The ____________________ rule is used to calculate the joint probability of two events.
ANS: multiplication

159. If A and B are ____________________ events, the joint probability of A and B is the product of the
probabilities of those two events.
ANS: independent

160. The ____________________ rule is used to calculate the probability of the union of two events.
ANS: addition

161. If A and B are ____________________ then the probability of the union of A and B is the sum of
their individual probabilities.
ANS: mutually exclusive

162. The first set of branches of a probability tree represent ____________________ probabilities.
ANS: marginal

163. The second set of branches of a probability tree represent ____________________ probabilities.
ANS: conditional

164. When you multiply a first level branch with a second level branch on a probability tree you get a(n)
____________________ probability.
ANS: joint

165. If two events are complements, their probabilities sum to ____________________.
ANS:
one
1

166. If two events are mutually exclusive their joint probability is ____________________.
ANS:
zero
0

SHORT ANSWER
167. Suppose A and B are two independent events for which P(A) = 0.20 and P(B) = 0.60.
a. Find P(A and B).

b. Find P(A or B).
ANS:
a. 0.12
b. 0.68

NARRBEGIN: College Professorship

College Professorship
A Ph.D. graduate has applied for a job with two colleges: A and B. The graduate feels that she has a 60%
chance of receiving an offer from college A and a 50% chance of receiving an offer from college B. If she
receives an offer from college B, she believes that she has an 80% chance of receiving an offer from
college A. Let A = receiving an offer from college A, and let B = receiving an offer from college B.
NARREND
168. {College Professorship Narrative} What is the probability that both colleges will make her an offer?
ANS:
(.5)(.8) = 0.40
169. {College Professorship Narrative} What is the probability that at least one college will make her an
offer?
ANS:
6 + .5 − .4 = 0.7

170. {College Professorship Narrative} If she receives an offer from college B, what is the probability that
she will not receive an offer from college A?
ANS:
1 − 0.8 = 0.2.

171. Suppose P(A) = 0.50, P(B) = 0.40, and P(B|A) = 0.30.
a. Find P(A and B).

b. Find P(A or B).
c. Find P(A|B).
ANS:
a. 0.15
b. 0.75
c. 0.375

172. A survey of a magazine’s subscribers indicates that 50% own a house, 80% own a car, and 90% of
the homeowners also own a car. What proportion of subscribers:
a. own both a car and a house?

b. own a car or a house, or both?
c. own neither a car nor a house?
ANS:
a. 0.45
b. 0.85
c. 0.15

173. Suppose A and B are two mutually exclusive events for which P(A) = 0.30 and P(B) = 0.40.
a. Find P(A and B).

b. Find P(A or B).
c. Are A and B independent events? Explain using probabilities.
ANS:
a. 0
b. 0.70
c. No. P(A and B) = 0 because they are mutually exclusive events. If they were independent events, you
would have P(A and B) = P(A) * P(B) = 0.12.

174. Suppose P(A) = 0.30, P(B) = 0.50, and P(B|A) = 0.60.
a. Find P(A and B).

b. Find P(A or B).
c. Find P(A|B).
ANS:
a. 0.18
b. 0.62
c. 0.36

175. Is it possible to have two events for which P(A) = 0.40, P(B) = 0.50, and P(A or B) = 0.30? Explain.
ANS:
Yes. In this situation, if P(A and B) = 0.60 it works.

176. A pharmaceutical firm has discovered a new diagnostic test for a certain disease that has infected
1% of the population. The firm has announced that 95% of those infected will show a positive test result,
while 98% of those not infected will show a negative test result.
a. What proportion of people don’t have the disease?

b. What proportion who have the disease test negative?
c. What proportion of those who don’t have the disease test positive?
d. What proportion of test results are incorrect?
e. What proportion of test results are correct?
ANS:
a. 0.99
b. 0.05
c. 0.02
d. 0.0203
e. 0.9797

NARRBEGIN: Marital Status

Marital Status
An insurance company has collected the following data on the gender and marital status of 300
customers.
Marital Status
Male 25 125 30
Female 50 50 20
Suppose that a customer is selected at random.

NARREND
177. {Marital Status Narrative} Find the probability that the customer selected is female or divorced.
ANS:
0.50

178. {Marital Status Narrative} Are gender and marital status mutually exclusive? Explain using
probabilities.
ANS:
No, since P(female and married) = 0.167 > 0. (Any other combination shows this also.)

179. {Marital Status Narrative} Is marital status independent of gender? Explain using probabilities.
ANS:
No, since P(married / male) = 0.694 ≠ P(married) = 0.583. (Any other combination shows this also.)

NARRBEGIN: Construction Bids

Construction Bids
A construction company has submitted bids on two separate state contracts, A and B. The company feels
that it has a 60% chance of winning contract A, and a 50% chance of winning contract B. Furthermore,
the company believes that it has an 80% chance of winning contract A if it wins contract B.
NARREND
180. {Construction Bids Narrative} What is the probability that the company will win both contracts?
ANS:
P(B and A) = P(B) * P(A|B) = (.50)(.80) = .40

181. {Construction Bids Narrative} What is the probability that the company will win at least one of the two
contracts?
ANS:
P(A or B) = P(A) + P(B) − P(A and B) = .60 + .50 − .40 = .70

182. {Construction Bids Narrative} If the company wins contract B, what is the probability that it will not
win contract A?
ANS:
P(Ac|B) = 1 − P(A|B) = 1 − .80 = .20

183. {Construction Bids Narrative} What is the probability that the company will win at most one of the two
contracts?
ANS:
1 − P(A and B) = 0.60

184. {Construction Bids Narrative} What is the probability that the company will win neither contract?
ANS:
1 − P(A or B) = 0.30

NARRBEGIN: Condo Sales and Interest

Condo Sales and Interest Rates
The probability that condo sales will increase in the next 6 months is estimated to be 0.30. The probability
that the interest rates on condo loans will go up in the same period is estimated to be 0.75. The
probability that condo sales or interest rates will go up during the next 6 months is estimated to be 0.90.
NARREND
185. {Condo Sales and Interest Rates Narrative} What is the probability that both condo sales and
interest rates will increase during the next six months?
ANS:
0.15

186. {Condo Sales and Interest Rates Narrative} What is the probability that neither condo sales nor
interest rates will increase during the next six months?
ANS:
0.10

187. {Condo Sales and Interest Rates Narrative} What is the probability that condo sales will increase but
interest rates will not during the next six months?
ANS:
0.15

CHAPTER 6 SECTION 4-5: PROBABILITY
TRUE/FALSE
188. Bayes’ Law is a formula for revising an initial subjective (prior) probability value on the basis of new
results, thus obtaining a new (posterior) probability value.
ANS: T PTS: 1 REF: SECTION 6.4-6.5

189. Although there is a formula defining Bayes’ law, you can also use a probability tree to conduct
calculations.

190. Bayes’ Law allows us to compute conditional probabilities from other forms of probability.

191. Bayes’ Law says that P(A|B) = P(B|A)P(A).
ANS: F PTS: 1 REF: SECTION 6.4-6.5

192. Conditional probabilities are also called likelihood probabilities.

193. In applying Bayes’ Law, as the prior probabilities increase, the posterior probabilities decrease.

194. Prior probability of an event is the probability of the event before any information affecting it is given.

195. Bayes’ Law can be used to calculate posterior probabilities, prior probabilities, as well as new
conditional probabilities.

196. Posterior probability of an event is the revised probability of the event after new information is
available.

197. Prior probability is also called likelihood probability.

198. In general, a posterior probability is calculated by adding the prior and likelihood probabilities.

199. We can use the joint and marginal probabilities to compute conditional probabilities, for which a
formula is available.

200. In problems where the joint probabilities are given, we can compute marginal probabilities by adding
across rows and down columns.
201. If joint, marginal, and conditional probabilities are available, only joint probabilities can be used to
determine whether two events are dependent or independent.

202. Suppose we have two events A and B. We can apply the addition rule to compute the probability that
at least one of these events occurs.

203. Posterior probabilities can be calculated using the addition rule for mutually exclusive events.

204. Prior probabilities can be calculated using the multiplication rule for mutually exclusive events.

205. We can apply the multiplication rule to compute the probability that two events occur at the same
time.

MULTIPLE CHOICE
206. Which of the following statements is false?

a. Thomas Bayes first employed the calculation of conditional probability in the eighteenth century.
b. There is no formula defining Bayes’ Law.
c. We use a probability tree to conduct all necessary calculations for Bayes’ Law.
ANS: B PTS: 1 REF: SECTION 6.4-6.5

207. A posterior probability value is a prior probability value that has been:
a. modified on the basis of new information.
b. multiplied by a conditional probability value.
c. divided by a conditional probability value.
d. added to a conditional probability value.
ANS: A PTS: 1 REF: SECTION 6.4-6.5

208. Initial estimates of the probabilities of events are known as:
a. joint probabilities
b. posterior probabilities
c. prior probabilities
d. conditional probabilities
ANS: C PTS: 1 REF: SECTION 6.4-6.5

209. Which of the following statements is false regarding a scenario using Bayes’ Law?
a. Prior probabilities are called likelihood probabilities.
b. Conditional probabilities are called posterior probabilities.
c. Posterior probabilities are calculated by using prior probabilities that have been modified based on new
information.
ANS: A PTS: 1 REF: SECTION 6.4-6.5

210. Bayes’ Law is used to compute:

a. prior probabilities.
b. joint probabilities.
c. union probabilities.
d. posterior probabilities.
ANS: D PTS: 1 REF: SECTION 6.4-6.5

COMPLETION
211. Thomas ____________________ first employed the calculation of conditional probability.
ANS: Bayes
PTS: 1 REF: SECTION 6.4-6.5

212. Bayes’ Law involves three different types of probabilities: 1) prior probabilities; 2) likelihood
probabilities; and 3) ____________________ probabilities.
ANS: posterior

213. Bayes’ Law involves three different types of probabilities: 1) ____________________ probabilities;
2) likelihood probabilities; and 3) posterior probabilities.
ANS: prior

214. Bayes’ Law involves three different types of probabilities: 1) prior probabilities; 2)
____________________ probabilities; and 3) posterior probabilities.
ANS: likelihood

215. There are situations where we witness a particular event and we need to compute the probability of
one of its possible causes. ____________________ is the technique we use to do this.
ANS:
Bayes’ Law
Bayes Law
Baye’s Law

216. In the scenario of Bayes’ Law, P(A|B) is a(n) ____________________ probability, while P(B|A) is a
posterior probability.
ANS: likelihood

217. In the scenario of Bayes’ Law, P(A|B) is a posterior probability, while P(B|A) is a(n)
____________________ probability.
ANS: likelihood

218. ____________________ can find the probability that someone with a disease tests positive by using
(among other things) the probability that someone who actually has the disease tests positive for it.
ANS:
Bayes’ Law
Bayes Law
Baye’s Law

SHORT ANSWER
NARRBEGIN: CertificationTest
Certification Test
A standard certification test was given at three locations. 1,000 candidates took the test at location A, 600
candidates at location B, and 400 candidates at location C. The percentages of candidates from locations
A, B, and C who passed the test were 70%, 68%, and 77%, respectively. One candidate is selected at
random from among those who took the test.
NARREND
219. {Certification Test Narrative} What is the probability that the selected candidate passed the test?
ANS:
(.5)(.7) + (.3)(.68) + (.2)(.77) = 0.708

220. {Certification Test Narrative} If the selected candidate passed the test, what is the probability that the
candidate took the test at location B?
ANS:
(.3)(.68) / .708 = 0.288

221. {Certification Test Narrative} What is the probability that the selected candidate took the test at
location C and failed?
ANS:
(.2)(.23) = 0.046

NARRBEGIN: Cysts
Cysts
After researching cysts of a particular type, a doctor learns that out of 10,000 such cysts examined, 1,500
are malignant and 8,500 are benign. A diagnostic test is available which is accurate 80% of the time
(whether the cyst is malignant or not). The doctor has discovered the same type of cyst in a patient.
NARREND
222. {Cysts Narrative} In the absence of any test, what is the probability that the cyst is malignant?
ANS:
M = Malignant, P(M) = .15

223. {Cysts Narrative} In the absence of any test, what is the probability that the cyst is benign?
ANS:
B = Benign, P(B) = .85
224. {Cysts Narrative} What is the probability that the patient will test positive?
ANS:
P(+) = P(+ and M) + P(+ and B) = P(+/M) • P(M) + P(+/B) • P(B)

= (.80)(.15) + (.20)(.85) = .29

225. {Cysts Narrative} What is the probability that the patient will test negative?
ANS:
P(−) = 1 − P(+) = 1 − .29 = .71 or

P(−) = P(− and M) + P(− and B) = P(−/M) • P(M) + P(−/B) • P(B)
= (.20)(.15) + (.80)(.85) = .71

226. {Cysts Narrative} What is the probability that the patient has a benign tumor if he or she tests
positive?
ANS:
P(B/+) = P(+ and B) / P(+) = P(+/B) • P(B) / P(+) = (.20)(.85) / (.29) = .586

227. {Cysts Narrative} What is the probability that the patient has a malignant cyst if he or she tests
negative?
ANS:
P(M/−) = P(− and M) / P(−) = P(−/M) • P(M) / P(−) = (.20)(.15) / (.71) = .042

NARRBEGIN: Messenger Service

Messenger Service
Three messenger services deliver to a small town in Oregon. Service A has 60% of all the scheduled
deliveries, service B has 30%, and service C has the remaining 10%. Their on-time rates are 80%, 60%,
and 40% respectively. Define event O as a service delivers a package on time.
NARREND
228. {Messenger Service Narrative} Calculate P(A and O).

ANS:
P(A and O) = P(A)P(O|A) = (.60)(.80) = 0.48

229. {Messenger Service Narrative} Calculate P(B and O).
ANS:
P(B and O) = P(B) P(O|B) = (.30)(.60) = 0.18

230. {Messenger Service Narrative} Calculate P(C and O).
ANS:
P(C and O) = P(C)P(O |C) = (.10)(.40) = 0.04

231. {Messenger Service Narrative} Calculate the probability that a package was delivered on time.
ANS:
P(O) = P(A and O) + P(B and O) + P(C and O) = .48 + .18 + .04 = 0.70

232. {Messenger Service Narrative} If a package was delivered on time, what is the probability that it was
service A?
ANS:
P(A|O) = P(A and O) / P(O) = 0.48 / 0.70 = 0.686

service B?
ANS:
P(B|O) = P(B and O) / P(O) = 0.18 / 0.70 = 0.257

service C?
ANS:
P(C|O) = P(C and O) / P(O) = 0.04 / 0.70 = 0.057

235. {Messenger Service Narrative} If a package was delivered 40 minutes late, what is the probability
that it was service A?
ANS:
P(A|Oc) = P(A and Oc) / P(Oc) = (0.60)(0.20) / 0.30 = 0.40

that it was service B?
ANS:
P(B|Oc) = P(B and Oc) / P(Oc) = (0.30)(0.40) / 0.30 = 0.40

that it was service C?
ANS:
P(C|Oc) = P(C and Oc) / P(Oc) = (0.10)(0.60) / 0.30 = 0.20

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Economics 9th Edition Gerald Keller

CHAPTER 6 SECTION 1-6

ANS: T PTS: 1 REF: SECTION 6.1

ANS: T PTS: 1 REF: SECTION 6.1

ANS: T PTS: 1 REF: SECTION 6.1

ANS: F PTS: 1 REF: SECTION 6.1

ANS: T PTS: 1 REF: SECTION 6.1

ANS: F PTS: 1 REF: SECTION 6.1

ANS: T PTS: 1 REF: SECTION 6.1

ANS: F PTS: 1 REF: SECTION 6.1

ANS: F PTS: 1 REF: SECTION 6.1

ANS: A PTS: 1 REF: SECTION 6.1

ANS: C PTS: 1 REF: SECTION 6.1

ANS: C PTS: 1 REF: SECTION 6.1

15. The collection of all possible outcomes of an experiment is called:

ANS: B PTS: 1 REF: SECTION 6.1

16. Which of the following is an approach to assigning probabilities?

ANS: B PTS: 1 REF: SECTION 6.1

ANS: C PTS: 1 REF: SECTION 6.1

ANS: C PTS: 1 REF: SECTION 6.1

ANS: B PTS: 1 REF: SECTION 6.1

ANS: D PTS: 1 REF: SECTION 6.1

ANS: D PTS: 1 REF: SECTION 6.1

ANS: D PTS: 1 REF: SECTION 6.1

ANS: A PTS: 1 REF: SECTION 6.1

ANS: A PTS: 1 REF: SECTION 6.1

ANS: C PTS: 1 REF: SECTION 6.1

ANS: D PTS: 1 REF: SECTION 6.1

ANS: B PTS: 1 REF: SECTION 6.1

ANS: A PTS: 1 REF: SECTION 6.1

29. The collection of all possible events is called

ANS: B PTS: 1 REF: SECTION 6.1

PTS: 1 REF: SECTION 6.1

PTS: 1 REF: SECTION 6.1

ANS: mutually exclusive

PTS: 1 REF: SECTION 6.1

ANS: sample space

PTS: 1 REF: SECTION 6.1

34. The outcomes of a sample space must be ____________________ and ____________________.

PTS: 1 REF: SECTION 6.1

PTS: 1 REF: SECTION 6.1

36. An individual outcome of a sample space is called a(n) ____________________ event.

PTS: 1 REF: SECTION 6.1

PTS: 1 REF: SECTION 6.1

ANS: relative frequency

PTS: 1 REF: SECTION 6.1

a. What is the random experiment?

PTS: 1 REF: SECTION 6.1

PTS: 1 REF: SECTION 6.1

NARRBEGIN: Hobby Shop Sales

Number of Trucks Sold Number of Weeks

PTS: 1 REF: SECTION 6.1

PTS: 1 REF: SECTION 6.1

PTS: 1 REF: SECTION 6.1

PTS: 1 REF: SECTION 6.1

PTS: 1 REF: SECTION 6.1

NARRBEGIN: Mutual Fund Price

PTS: 1 REF: SECTION 6.1

48. {Mutual Fund Price Narrative} Interpret the 75% probability.

PTS: 1 REF: SECTION 6.1

a. Rolling an odd number

PTS: 1 REF: SECTION 6.1

34. The outcomes of a sample space must be and .