Department of Economics ECON2008 (EC23L) - Statistical Methods I

Problem Set 2 Random Variables & Probability Distribution Functions

1. The probability that an automobile being filled with gasoline will also need an oil change is 0.25; the probability that it needs a new oil filter is 0.40; and the probability that both the oil and filter need changing is 0.14. a. If the oil had to be changed, what is the probability that a new oil filter is needed? b. If a new oil filter is needed, what is the probability that the oil has to be changed?

2. In a group of 120 girls, each is either freckled or blonde or both; 80 are freckled and 60 blonde. A girl is to chosen at random from the group. A is the event a freckled girl is chosen and B is the event a blonde girl is chosen. (a) Calculate P(A B) and (b) State giving a reason, if you think A and B are independent. 3. The probability that a voter will believe a rumour about a politician is 0.2. If 20 voters are told individually, find the probability that a. None of the 20 believe the rumour. b. Three or more believe the rumour. c. Determine the mean and standard deviation of the number who believe the rumour. d. More than 18 do not believe the rumour. 4. A hospital finds that 25% of its bills are at least one month in arrears. A random sample of 450 bills was taken. a. What is the probability that less than 100 bills in the sample were at least 1 month in arrears? b. What is the probability that the number of bills in the sample at least 1 month in arrears was between 120 and 150 (inclusive).

5. An insurance company holds fraud insurance policies on 6000 firms. In any given year, the probability that any single policy will result in a claim is 0.001. Find the probability that at least three claims are made in a given year. Use the Poisson approximation to the binomial distribution. 6. A state has a law requiring motorists to carry insurance. It was estimated that, despite this law, 7.5% of all motorists in the state are uninsured. A random sample of 60 motorists was taken. Use the Poisson
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approximation to the binomial distribution to estimate the probability that at least three of the motorists in the sample are uninsured. Also indicate what calculations could be used to find this probability if the Poisson approximation was not used. 7. The proportion of people who respond to a certain mail-order solicitation is a continuous random variable X that has the density function
2( x 2) , f ( x) 5 0 0 x 1 elsewhere

(a) Show that P(0 < X < 1) = 1. (b) Find the probability that more than 1/4 but fewer than 1/2 of the people contacted will respond to this type of solicitation. 8. Times to gather preliminary information from arrivals at an outpatient clinic follow an exponential distribution with mean 15 minutes. Find the probability, for a randomly chosen arrival, that more than 18 minutes will be required. 9. Often it is important to know whether or not it is better to periodically replace an old component (e.g., a computer chip, halogen light bulb or compact disk player) with a new component. For example, for certain types of light bulbs, an old bulb that has been in use for a while tends to have a longer life length than a new bulb. Let x represent the life length (in hours) of a new halogen light bulb. Assume that x has an exponential distribution with =0.004. a. Find the mean of x and interpret its value b. Find the probability that the life length of the new halogen exceeds 500 hours 10. The length of time between arrivals at a hospital clinic is approximately exponential. Suppose the mean time between arrivals for patients at a clinic is 4 minutes. a. What is the probability that a particular inter-arrival time (the time between the arrival of two patients) is less than one minute? b. What is the probability that an inter-arrival time will exceed 10 minutes?

11. A car salesman calculates probabilities for the number of cars that he sells in a week. The probabilities are given in the table below.
Number of Cars Probability 0 0.10 1 0.20 2 0.35 3 0.16 4 0.12 5 0.07

a. Find the expected number of cars that will be sold in the week. b. Find the standard deviation of the number of cars that will be sold in the week. c. The salesman receives a salary of $250, plus an additional $300 for each car sold. Find the mean and standard deviation of his total salary for the week. d. What is the probability that the salesmans salary for the week will be more than $1000?

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12. A corporation produces packages of paper clips. The number of clips per package varies, as indicated in the accompanying table.
Number of Clips Proportion of Packages 47 0.04 48 0.13 49 0.21 50 0.29 51 0.20 52 0.10 53 0.03

a. What is the probability that a randomly chosen package will contain between 49 and 51 clips (inclusive)? b. Find the mean and standard deviation of the number of paper clips per package. c. The cost (in cents) of producing a package of clips is 16+2X, where X is the number of clips in the package. The revenue from selling the package, however many clips it contains, $1.50. If profit is defined as the difference between revenue and cost, find the mean and standard deviation of profit per package. 13. An automobile dealer mounts a new promotional campaign. Purchasers of new automobiles may, if dissatisfied for any reason, return them within 2 days of purchase and receive a full refund. The cost to the deal of such a refund is $250. The dealer estimates that 15% of all purchasers will indeed return automobiles and obtain refunds. Suppose that 50 automobiles are purchased during the campaign period. a. Find the mean and standard deviation of the number of these automobiles that will be returned for refund. b. Find the mean and standard deviation of the total refund cost that will accrue as a result of these 50 purchases.

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