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Statistical Methods for Business and Economics

Fall 2016 Final Exam
Professor Harrington

Instructions: You will have three hours for this exam. You may use any books or, notes you
would like. Use a computer only to view the text, notes and for statistical tables. Do not use
Excel. Please show all your work with pictures of statistical distributions where appropriate and
the process by which you arrived at the solutions. Please keep your rounding consistent
throughout the problem (approximately three significant figures).

1. Over the years that Maester Hodor has been teaching at the Oldtown Citadel, he has had a
pass rate of 90 percent who take his course, The Political Economy of Westeros. In order
to improve the proportion of students receiving passing grades, Maester Hodor has
applied a series of advanced teaching techniques to this year’s class. Of his 60 students,
57 received passing grades.

a) At a significance level of .05, should Maester Hodor conclude that his new teaching
techniques were effective? (10 points)

b) What is the p-value of this sample result? Put this p-value into context and explain its
meaning. (5 points)

2. A survey company is trying to determine whether or not employment status affect

people’s expectations of their next year’s economic situation. The company chooses a
random sample of around 1800 working-age respondents, who are asked about their
economic outlook and identify their employment status. The results are as follows. Does
it appear that employment status affect people’s economic outlook, using the .01 level of
significance? (15 points)

better worse won't change Total

Permanent 235 186 203 624
Contractor 150 256 194 600
Unemployed 173 160 231 564
Total 558 602 628 1788
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3. The following table contains ACT scores and GPA for eight college students.

Student GPA ACT score

1 2.8 21
2 3.4 24
3 3 26
4 3.5 27
5 3.6 29
6 3 25
7 2.7 25
8 3.7 30

Using the data in Appendix A, answer the following questions:

a) Write out the linear function determined by the ordinary least squares method to estimate
GPA scores based on ACT scores. Please show your formulas and calculations. (3 points)

b) Graph a scatter plot of the data. On the same graph, graph the least squares line computed
in (a). Please be clear what two points you are using for your graph of the line. (3 points)

c) Put in words the meaning of the intercept and slope coefficient. (3 points)

d) Write the out the formulas and then show your calculations for the nine values of the
ANOVA table. (3 points)

e) State the null and alternative hypotheses to test for the significance of the slope
coefficient using t-test. Is this slope coefficient statistically significant at 5 % level of
significance? Show your calculations and a picture of the probability distribution
including the test statistic. (3 points)

f) Write out the formulas and then show your calculations for r and r squared. (3 points)
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4. The SAIS library is interested in determining the average number of pages printed by
students per library visit. The library takes a random sample of 8 students and records the
number of pages they printed on their most recent library visit. The printed page counts
collected were:

15, 2, 30, 6, 17, 5, 9, 12

a) Assuming the students’ printed page counts are normally distributed, calculate a 90
percent confidence interval for the average number of pages SAIS students print per trip
to the library.(10 points)

b) Again assuming normality, compute a 95 percent confidence interval for the average
number of pages SAIS students print per library visit. (4 points)

c) Put these confidence intervals into words. (3 points)

5. An animal protection NGO is trying to track the illegal hunting activity of the extremely
endangered wild camel in Mongolia. The organization obtained the past decade’s records
from local authorities, and counted the numbers of illegal hunting cases reported in two
natural reserves, Great Gobi Reserve A and Great Gobi Reserve B, on a weekly basis. To
compare the illegal hunting cases in the two reserves, the organization picks a random
sample of nine weeks’ records from Reserve A, and another random sample of eight
weeks’ records from Reserve B.

Reserve A: 13 10 9 11 12 10 9 14 15
Reserve B: 15 12 12 10 14 17 18 16

a. Assuming that the number of weekly reported illegal hunting cases are normally
distributed, use a .05 level of significance to determine whether there is a significant
difference between the two reserves in terms of the number of reported illegal hunting
cases per week. Write out and test the hypothesis. Show your work and formulas
along with a picture of the relevant probability distribution. (10 points)

b. Now assuming that the underlying populations of weekly reported illegal hunting
cases are not normally distributed, write out and test the hypotheses to determine if
the two populations are identical using the Mann-Whitney-Wilcoxon test. (10 points)
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6. Appendix B contains the first 15 observations of a sample data for 935 rural service sector
working individuals containing their monthly wages, education level and experience level.
Wages are in dollars while education and experience are denoted in years. That is followed
by the Excel regression output

a) Write out the linear function determined by the ordinary least squares method to estimate
monthly wages based on the number of years of education and experience. Report the
standard errors and the t values in parentheses under the slope coefficients. (3 points)

b) Interpret the meaning of the coefficient on education and the coefficient on experience.
(4 points)

c) What is the expected monthly wage for an individual with 12 years of education and 16
years of experience? (3 points)

d) Show the formula and computations for the F statistic. Are the estimated coefficients
jointly statistically significant at 5%? State clearly the hypothesis that you are testing and
draw a picture of the probability distribution. (5points)