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4/20/2008

14 Exercises
Mix and Match
1. Sample 2. Census 3. Target population 4. Statistic 5. Parameter 6. Sampling frame 7. Simple random sample 8. Stratified sample 9. Bias 10. Nonresponse Match the concept to the correct description.
a. Complete collection of items desired to be studied. b. A list of items in the population. c. A subset of a larger collection of items. d. A sample within homogeneous subsets of the population e. A characteristic of a sample. f. Occurs if a sample distorts a property of the population. g. A comprehensive study of every item h. Respondents choose not to answer questions. i. A characteristic of a population. j. Chosen so that all subsets of size n are equally likely.

True/False
If you believe that a statement is false, briefly explain why you think it is false.Every member of the population is equally likely to be in a simple random sample. 12. The size of the survey should be a fixed percentage of the population size in order to produce representative results. 13. Bias due to the wording of questions causes different samples to present different impressions of the population. 14. A census offers the most accurate accounting of the characteristics of the target population. 15. The sampling frame is a list of every item that appears in a sample, including those that did not respond to questions. 16. Randomization produces samples that mimic the various characteristics of the population without systematic bias. 17. Voluntary response samples occur when the respondents are not paid for their participation in a survey. 18. Sampling variation occurs when respondents change their answers to questions presented during an interview or change their answers when offered a repeated question. 19. Question wording has been shown to have no influence on the responses in surveys. 20. Larger surveys convey a more accurate impression of the population than smaller surveys.

4/20/2008 14 Exercises

Think About It
For each of the surveys and samples in Questions 21-26, list the following characteristics a-f based on the brief description of the survey that is shown. a) Population b) Parameter of interest c) Sampling frame d) Sample size e) Sampling design, including whether or not randomization was employed f) Any potential sources of bias or other problems with the survey or sample 21. A business magazine mailed a questionnaire to the human resource directors of all of the Fortune 500 companies, and received responses from 23% of them. Among those who responded, 40% reported that they did not find that such surveys intruded significantly on their workday. 22. PC Magazine asks all of its readers to participate in a survey of their satisfaction with different brands of computer systems and peripherals. In the 2004 survey, more than 9000 readers rated the products on a scale from 1 to 10. The magazine reported that the average rating assigned by 225 readers to a Kodak compact digital camera was 7.5. 23. A company packaging snack foods maintains quality control by randomly selecting 10 cases from each days production. Each case contains 50 bags. An inspector selects and weighs two bags. 24. Inspectors from the food-safety division of the Department of Agriculture visit farms unannounced and take samples of the milk to test for contamination. If the milk is found to contain dirt, antibiotics unsuited for human consumption, or other foreign matter, the milk will be destroyed. 25. A vendor opens a small booth at a supermarket to offer customers a taste of a new beverage. The staff of the booth offers the beverage to adults who pass though the soda aisle of the store near a display of the product. Customers who react favorably receive a discount coupon toward future purchases. 26. The information that comes with a flat-screen television includes a registration card to be returned to the manufacturer. Among questions that identify the customer, the registration card asks the purchaser to identify the cable provider or other source of television programming. 27. A bank with branches in a large metropolitan area is considering opening its offices on Saturday, but it is uncertain whether customers will prefer (1) offering walk-in hours on Saturday or (2) extending branch hours during the week. Listed below are some of the ideas proposed for gathering data. For each, indicate what kind of sampling strategy is involved and what (if any) biases might result. a) Put a big ad in the newspaper asking people to log their opinions on the banks Web site. b) Randomly select one of the branches and contact every customer at that bank by phone. c) Send a survey to every customers home, and ask the customers to fill it out and return it.

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d) Randomly select 20 customers from each branch. Send each a survey, and follow up with a phone call if they do not return the survey within a week 28. Lets revisit the bank described in the previous exercise. Four new sampling strategies have been proposed to help the bank determine whether customers favor opening on Saturdays versus keeping branches open longer during the week. For each, indicate what kind of sampling strategy is involved and what (if any) biases might result. a) Sponsor a commercial during a TV program, asking people to dial one of two phone numbers to indicate which option they prefer. b) Hold a meeting at each branch and tally the opinions expressed by those who attend the meetings. c) Randomly select one day at each branch and contact every customer who visits the branch that day. d) Go through the banks customer records, selecting every 100th customer. Hire a survey research company to interview the people chosen. 29. Two members of a banks research group have proposed different questions to ask in seeking customers opinions. Question 1: Should United Banks take employees away from their families to open on Saturdays for a few hours? Question 2: Should United Banks offer its customers the flexibility of convenient banking over the weekend? Do you think responses to these two questions might differ? How? 30. An employer replaced its former paycheck system with a paperless system that directly deposits payments into employee checking or savings accounts. To verify that proper deductions have been made, employees can check their pay stubs on-line. To investigate whether employees prefer the new system, the employer distributed an e-mail questionnaire that asked Do you think that the former payroll system is not inferior to the new paperless system? Do you think that this question could be improved? How so? 31. Between quarterly audits, a company checks its accounting procedures to detect problems before they become serious. The accounting staff processes payments on about 120 orders each day. The next day a supervisor checks 10 of the transactions to be sure they were processed properly. a) Propose a sampling strategy for the supervisor. b) How would you modify the sampling strategy if the company makes both wholesale and retail sales that require different bookkeeping procedures? 32. A car manufacturer is concerned that dealers conceal unhappy customers by keeping them out of surveys conducted by the factory. The manufacturer suspects that certain dealers enter incorrect addresses for dissatisfied customers so that they do not receive the satisfaction survey that is mailed by the manufacturer. If a current survey of the 65 customers at a dealership indicates 55% rate its service as exceptionally good, can the manufacturer estimate the proportion of all customers at this dealership who feel that its service is exceptionally good? Can it estimate the proportion at other dealerships?
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4M Guest Satisfaction Companies in the competitive hotel industry need to keep up with the tastes of their visitors. If the rooms seem dated and the service is slow, travelers will choose a different destination for their next visit. One means of monitoring customer satisfaction is to put cards in guest rooms, asking for feedback. These are seldom returned, and when they are returned, it is usually because of some unusual event. To get a more representative sample, a large hotel frequently used by business travelers decided to conduct a survey. It contacted every guest who stayed in the hotel on a randomly chosen weekday during the previous two months (June and July, 2005). On the date chosen, (Tuesday July 19, 2005), the hotel had 437 guests. With several follow-up calls (unless the customer asked to be excluded), the hotel achieved an 85% response rate. The hotel could have mailed questionnaires to guests much more cheaply, at about 1/10 of the cost of the telephone calling. The key question on the survey was Do you plan to stay with us on your next visit to our area? In the survey, 78% of guests responded Yes to this question. Motivation a) What can the company hope to learn from this survey that it could not get from the cards left in guest rooms? Method b) The response rate from mailed questionnaires is typically less than 25%. Would it make sense to mail out survey forms to more customers rather than go to the expense of calling? c) What is the unit of observation in this survey? What is the population? d) Does the survey yield a random sample of guests at the hotel, or does this design make it more likely to include some guests than others? Mechanics e) In calling the customers, one of the interviewers was a man and one was a woman. Might this difference produce a difference in answers? f) Some customers were called repeatedly in order to improve the response rate. If the repeated calling annoyed a customer, how do you think this might bias the survey? Message g) In describing the results of the survey, what points about the random design should be made in order to justify the reliability of the results? h) How should the message deal with the 15% of customers from that day that either did not reply or asked to be excused from the survey and not called again?

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4M Tax Audits The Internal Revenue Service collects personal income and corporate taxes. Most of the job for income taxes comes with processing the paperwork that accompanies taxes. The IRS verifies, for example, the reported social security numbers and compares reported earnings from W-2 and 1099 forms to the earnings reported by each taxpayer. Forms with errors or discrepancies lead to follow-up letters, and in some cases, the dreaded IRS audit. The IRS has limited manpower and cannot audit every taxpayers return. Sampling is a necessity. The IRS temporarily stopped doing audits for a few years, but resumed auditing random samples of tax returns in 2007.1 Motivation a) Why is it important for the IRS to audit a sample of all returns, not just those flagged as having an anomaly? Method b) For certain types of audits, an agent visits the residence of the taxpayer. What sort of survey method is well suited to audits that require a personal visit? c) If the IRS selects a sample of income tax forms for inspection at random, most will be for individuals with earnings below \$100,000. According to the US Census, about 85% of households earn less than \$100,000 and half earn less than \$50,000. If the IRS would like to have 30% of the audited tax returns to cover households that earn more than \$100,000 (with the rest chosen at random), how should it choose the sample? Mechanics d) If the IRS selects 1,000 personal income tax returns at random from among all submitted for the calendar year 2007, will it obtain a random sample of taxpayers for this year? (Note: married couples typically file a joint return.) e) An auditor selected a random sample of returns among those submitted on April 15, 2007. Explain why these are not a representative sample of all of the returns for 2007. Message f) If the IRS is interested in finding and discouraging tax cheats, what sort of sampling methods should it advertise in press releases?

The Next Audit Scare, The Wall Street Journal, June 13, 2007.

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