Eco 302: Assignment 2-Fall2019: solutions- Chapters: 8, 9, 10 & 13: Total 250 points

Due by Midnight (11:59 pm), Sunday, November 24th, 2019

True / False Questions (2 points each)

Chapter 8
1. The reason sample variance has a divisor of n-1 rather than n is that it makes the sample
variance an unbiased estimate of the population variance. TRUE

̅ (X-bar) is always a normal distribution according to the

2. The sampling distribution of 𝑿
Central limit theorem. FALSE

3. The standard deviation of the sampling distribution of the sample mean increases as the
sample size increases. FALSE

̅ (X-bar
4. If the sampled population is a normal distribution, then the sampling distribution of 𝑿
is normal only for a large enough sample size. FALSE

5. If a population is known to be normally distributed, then it follows that the sample mean must
equal the population mean. FALSE

̅ (X-bar) is always equal to the mean of the

6. The mean of the sampling distribution of 𝑿
sampled population. FALSE

Chapter 9
7. Assuming the same level of significance, as the sample size increases, the critical t-value
becomes smaller and becomes lower than Z-value. FALSE

8. When constructing a confidence interval for a sample proportion, the t distribution is

appropriate whenever the population standard deviation is not known, whether the sample size is
large or small. FALSE

9. When the population is normally distributed and the population standard deviation  is
unknown, then for any sample size n, the sampling distribution of 𝑿̅ (X-bar) is based on the t
distribution. FALSE

10. When the level of confidence and sample standard deviation remain the same, a confidence
interval for a population mean based on a sample of n = 100 will be wider than a confidence
interval for a population mean based on a sample of n = 150. TRUE

1
11. When the level of confidence and the sample size remain the same, a confidence interval for
a population mean µ will be narrower, when the sample standard deviation s is smaller than
when s is larger. TRUE

Chapter 10
12. The closer is the hypothesized mean is from the actual mean the higher is the power of the
test. TRUE

13. The manager of the quality department for a tire manufacturing company wants to know the
average tensile strength of rubber used in making a certain brand of radial tire. She knows the
population standard deviation and uses a Z test to test the null hypothesis that the mean tensile
strength is 800 pounds per square inch. The calculated Z test statistic is a positive value that
leads to a p-value of .067 for the test. If the significance level is .01, the null hypothesis would be
rejected. Assume that the population of pressure values is normally distributed. FALSE

14. The smaller the p-value, the more we doubt the null hypothesis. TRUE

15. You cannot make a Type II error when the null hypothesis is true. TRUE

16. Type I error is failing to reject a False Null Hypothesis. FALSE

17. When conducting a hypothesis test about a single mean, other relevant factors held constant,
changing the level of significance from .05 to .01 will reduce the probability of a Type II error.
FALSE

18. When the null hypothesis is false, you cannot make Type II error. FALSE

19. Everything else being constant, increasing the sample size decreases the probability of
committing a Type I error. FALSE

Chapter 13
20. The error term is the difference between the actual value of the dependent variable and the
corresponding mean value of the dependent variable. FALSE

21. The Coefficient of Determination does not show the direction of relationship between the
dependent and the independent variables. TRUE

2
22. The intercept of the simple linear regression equation represents the average change in the
value of the dependent variable per unit change in the independent variable (X). FALSE

23. The correlation coefficient is the ratio of explained variation to total variation. FALSE

24. If there is a strong correlation between the independent and dependent variable, we expect
that an increase in the value of the independent variable is associated with an increase in the
value of the dependent variable. FALSE

25. In simple linear regression analysis, if the variance of the error term is correlated with the
independent variable, then the assumption of Homoscedasticity is violated. TRUE

Multiple Choices (4 Points Each)

Chapter 8
1. A manufacturing company measures the weight of boxes before shipping them to the
customers. If the box weights have a population mean and standard deviation of 90 lbs. and 24
lbs. respectively, then based on a sample size of 36 boxes, the probability that the average weight
of the boxes will be less than 94 lbs. is:
A. 34.13%
B. 15.87%
C. 84.13%
D. 56.36%
E. 16.87%

2.If the sampled population has a mean 48 and standard deviation 18, then the mean and the
standard deviation for the sampling distribution of 𝑋̅ (X-bar) for n = 9 are:
A. 48 and 18
B. 48 and 9
C. 16 and 6
D. 48 and 6
E. 48 and 2

3. If a population distribution is known to be normal, then it follows that:

A. The sample mean must equal the population mean
B. The sample mean must equal the population mean for large samples
C. The sample standard deviation must equal the population standard deviation
D. All of the above
E. None of the above

4. The internal auditing staff of a local manufacturing company performs a sample audit each
quarter to estimate the proportion of accounts that are delinquent more than 90 days overdue.
The historical records of the company show that over the past 8 years 14 percent of the accounts

3
are delinquent. For this quarter, the auditing staff randomly selected 250 customer accounts.
What is the probability that at least 30 accounts will be classified as delinquent?
A. 31.86%
B. 18.14%
C. 81.86%
D. 63.72%
E. 75.84%

5. In a manufacturing process a machine produces bolts that have an average length of 3 inches
with a variance of .03. If we randomly select three bolts from this process: What is the
probability the mean length of the bolt is more than 3.16 inches?
A. 5.48%
B. 97.72%
C. 94.52%
D. 44.52%
E. 2.28%

Chapter 9
6. The width of a confidence interval will be:
A. Narrower for 99% confidence than 95% confidence
B. Wider for a sample size of 100 than for a sample size of 50
C. Wider for 95% confidence than 90% confidence
D. Wider when the sample standard deviation (s) is small than when s is large

7. A confidence interval increases in width as

A. The level of confidence decreases
B. N increases
C. S decreases
D. All of the above
E. None of the above

8. As standard deviation increases, the samples size has to _____________ in order to achieve a
specified level of confidence.
A. Decrease
B. Increase
C. Remain the same

9. The internal auditing staff of a local manufacturing company performs a sample audit each
quarter to estimate the proportion of accounts that are current (between 0 and 60 days after
billing). The historical records show that over the past 8 years 70 percent of the accounts have
been current. Determine the sample size needed in order to be 95% confident that the sample
proportion of the current customer accounts is within .03 of the true proportion of all current
4
accounts for this company.
A. 1842
B. 1548
C. 897
D. 632
E. 1267

10. When a confidence interval for a population proportion is constructed for a sample size n= 60
and the value of p = 0.4, the interval is based on:
A. the Z distribution
B. the t distribution
C. a Skewed distribution
D. None of the above

11. In a manufacturing process a random sample of 9 bolts manufactured has a mean length of 3
inches with a variance of .09. What is the 90% confidence interval for the true mean length of the
bolt?
A. 2.8355 to 3.1645
B. 2.5065 to 3.4935
C. 2.8140 to 3.1860
D. 2.4420 to 3.5580
E. 2.9442 to 3.0558

12. The internal auditing staff of a local manufacturing company performs a sample audit each
quarter to estimate the proportion of accounts that are delinquent (more than 90 days overdue).
For this quarter, the auditing staff randomly selected 400 customer accounts and found that 80 of
these accounts were delinquent. What is the 95% confidence interval for the proportion of all
delinquent customer accounts at this manufacturing company?
A. 0.1608 to 0.2392
B. 0.1992 to 0.2008
C. 0.1671 to 0.2329
D. 0.1485 to 0.2515
E. 0.1714 to 0.2286

Chapter 10
13. Which statement is incorrect?
A. The null hypothesis contains the equality sign
B. When a false null hypothesis is not rejected, a Type II error has occurred
C. If the null hypothesis is rejected, it is concluded that the alternative hypothesis is true
D. If we reject the null hypothesis, we cannot commit Type I error

5
14. If a null hypothesis is rejected at a significance level of 0.01, it will ______ be rejected at a
significance level of 0.05
A. Always
B. Sometimes
C. Never

15. A study investigated the relationship of employment status to mental health. A sample of 49
unemployed men took a mental health examination measuring present mental health with lower
values indicating better mental health. Their mean score was 10.94 and a standard deviation of
4.90. How much evidence do we have that the mean score exceeds 10?
A. No evidence (not even at 10%)
B. Some evidence (significant at 10% only)
C. Strong evidence (significant at 5% but not 1%)
D. Very strong evidence (significant even at 1%)

16. If a one-sided null hypothesis is not rejected for a single mean at a given significance level,
the corresponding two-sided null hypothesis ( with the same sample size, the same standard
deviation and the same mean) will _________ be rejected at the same significance level.
A. Always
B. Sometimes
C. Never

17. A major airline company is concerned that its proportion of late arrivals has substantially
increased in the past month. Historical data shows that on the average 18% of the company
airplanes have arrived late. In a random sample of 1,250 airplanes, 250 airplanes have arrived
late. If we are conducting a hypothesis test of a single proportion to determine if the proportion
of late arrivals has increased: What is the correct statement of null and alternative hypothesis?
A. H0: p <.18 and HA: p .18
B. H0: p .18 and HA: p >.18
C. H0: p =.18 and HA: p  .18
D. H0: p >.18 and HA: p .18
E. H0: p .20 and HA: p >.20

18. When carrying out a large sample test of H0:   10 vs. Ha:  > 10 by using a critical value
approach, we reject H0 at level of significance  when the calculated test statistic is:
A. Less than z
B. Less than - z
C. Greater than z
D. Greater than z/2
E. Less than the p value

6
19. What value(s) of alpha would we reject H0 for  greater than 10 if X
̅ = 11, s =2 and n=36?
A. .05 and .01
B. .01 and .001
C. .05 and .10 but not .01
D. All of the above
E. None of the above

Chapter 13
20. Which of the following is a violation of one of the major assumptions of the simple
regression model?
A. The error terms are independent of each other
B. Histogram of the residuals form a bell-shaped, symmetrical curve
C. The error terms show no pattern
D. As the value of x increases, the value of the error term also increases

21. The least squares regression line minimizes the sum of the
A. Differences between actual and predicted Y values
B. Squared differences between actual and predicted Y values
C. Absolute deviations between actual and predicted X values
D. Absolute deviations between actual and predicted Y values
E. Squared differences between actual and predicted X values

22. The point estimate of the in a regression model is

A. SSE
B. B0
C. MSE
D. B1

23. In simple regression analysis the quantity that gives the amount by which Y (dependent
variable) changes for a unit change in X (independent variable) is called the
A. Coefficient of determination
B. Standard error
C. The Y intercept of the regression line
D. Correlation coefficient
E. Slope of the regression line

24. The correlation coefficient may assume any value between

A. 0 and 1
B. -1 and 1
C. -infinity and + infinity

7
D. 0 and infinity
E. -1 and 0

25. In simple regression analysis, if the correlation coefficient is a positive value, then
A. The Y intercept must also be a positive value
B. The coefficient of determination can be either positive or negative, depending on the value of
the slope
C. The least squares regression equation could either have a positive or a negative slope
D. The slope of the regression line must also be positive
E. The standard error of estimate can either have a positive or a negative value

Essay type Questions (10 points each)( You must show all your relevant work in Essay type
to receive full points)
Chapter 8
1. Packages of sugar bags for Sweeter Sugar Inc. have an average weight of 16 ounces and a
standard deviation of 0.24 ounces. The weights of the sugar bags are normally distributed. What
is the probability that 16 randomly selected packages will have an average weight less than 15.97
ounces?

Solution:

𝜇 = 16, 𝜎 = 0.24 , 𝑛 = 16

P(𝑋̅ < 15.97)=?

𝑋̅ − 𝜇 15.97 − 16
𝑍= 𝜎 = = −0.50
0.24
√𝑛 √16

P(𝑋̅ < 15.97) = P( Z ≤ -0.50) = 0.3085

2. The population of lengths of aluminum-coated steel sheets is normally distributed with a

mean of 30.0 inches and a standard deviation of 0.9 inches. A sample of 36 metal sheets is
randomly selected from a batch. What is the probability that the average length of a sheet is
between 29.82 and 30.27 inches long?

Solution:

𝜇 = 30, 𝜎 = 0.9 , 𝑛 = 36

P(29.82< 𝑋̅ < 30.27)=?

8
 𝑋̅ − 𝜇 29.82 − 30
𝑍1 = 𝜎 = = −1.20
0.9
√𝑛 √36
30.27 − 30
𝑍2 = = 1.80
0.9
√36

P(29.82< 𝑋̅ < 30.27)=P(-1.20 ≤ Z ≤ 1.80)= 0.9641-0.1151=0.8490

Chapter 9
3. The quality control manager of a tire company wishes to estimate the tensile strength of a
standard size of rubber used to make a class of radial tires. A random sample of 49 pieces of
rubber from different production batches is subjected to a stress test. The test measures the force
needed to break the rubber in pounds. According to the sample results, the average pressure is
250 pounds and the standard deviation is 42 pounds. Determine the 95% confidence interval.

Solution

The 95% confidence interval for the mean tensile strength is

𝑠
𝑋̅ ± 𝑡𝛼,𝑛−1
2 √𝑛
42
250 ± 2.010 ( )
√49

237.94 < 𝜇 < 262.06

The 95% confidence interval shows that the mean tensile strength lies between 237.94 and
262.06 pounds.

4. The production manager for the XYZ manufacturing company is concerned that the customer
orders are being shipped late. He asked one of his planners to check the timeliness of shipments
for 900 orders. The planner randomly selected 900 orders and found that 180 orders were
shipped late. Construct the 95% confidence interval for the proportion of orders shipped late.

Solution

The 95% confidence interval is

𝑝̂ 𝑞̂
𝑝̂ ± 𝑍𝛼 . √
2 𝑛

9
 180
Where 𝑝̂ = 900 = 0.20, 𝑞̂ = 1 − 𝑝̂ = 0.80

0.20 × 0.80
0.20 ± (1.96)√
900

The 95% interval is (0.174, 0.226).

5. A cable TV company wants to estimate the percentage of cable boxes in use during an
evening hour. An approximation based on previous surveys is 25 percent. The company wants
the new estimate to be at the 90 percent confidence level and within 2 percent of the actual
proportion. What sample size is needed?
2
𝑍𝛼 1.645 2
2
𝑛 = 𝑝̂ 𝑞̂ ( ) = (0.25)(0.75) ( ) = 1268.33
𝑒 0.02

𝑛 ≅ 1269

Chapter 10
6. Given sample data: 61.2, 61.9, 62.8, 63.1, 64.0, 64.3, 64.9, 65.5, 66.3 and 67.9,
test H0:   62.89 versus H1:  > 62.89 at  = 0.05.

Solution

H0:   62.89

H1:  > 62.89

Level of significance: α=5%

Test-statistic:

𝑋̅ − 𝜇
𝑡= 𝑠
√𝑛

Which is true under the null hypothesis.

Calculation

10
 ∑𝑋
𝑋̅ = = 64.19
𝑛

∑(𝑋 − 𝑋̅)2
𝑠= √ = 2.049
𝑛−1

𝑋̅ − 𝜇 64.19 − 62.89
𝑡= 𝑠 = = 2.006
2.049
√𝑛 √10

Critical region

Reject H0, if t > 𝑡𝛼(𝑛−1) = 2.821 𝑎𝑡 5% level of significance and 9 degrees of freedom.

Decision: As t < 2.821, we will not reject null hypothesis.

7. Test H0: π = 0.25 versus HA: π  0.25 with p = 0.33 and n = 100 at alpha = 0.05 and 0.10.

Null Hypothesis: 𝐻0 ∶ 𝑝 = 0.25

Alternative Hypothesis: 𝐻𝐴 ∶ 𝑝 ≠ 0.25

Level of significance: 5%

Test-statistic:

𝑝̂ − 𝑝
𝑧=
𝑝𝑞
√
𝑛

Computation:

Where 𝑝̂ = 0.33

𝑝̂ − 𝑝 0.33 − 0.25
𝑍= = = 1.848
𝑝𝑞
√ √(0.25)(0.75)
𝑛 100

11
Critical region 1: Reject H0, if Z > 𝑍𝛼 0r Z < -𝑍𝛼 where 𝑍𝛼 = 1.96 at 5% level of significance.
2 2 2

Decision:

As Z < 1.96, we will not reject our null hypothesis.

At 10% level of significance

Critical region 1: Reject H0, if Z > 𝑍𝛼 0r Z < -𝑍𝛼 where 𝑍𝛼 = 1.645 at 10% level of significance.
2 2 2

Decision:

As Z > 1.645, we will reject our null hypothesis.

8. Test at α =.05 and 0.10 the hypothesis that a majority (more than 50%) of students favor
the plus/minus grading system at a university if in a random sample of 500 students, 265
favor the system?

Null Hypothesis: 𝐻0 ∶ 𝑝 ≤ 0.50

Alternative Hypothesis: 𝐻𝐴 ∶ 𝑝 > 0.50

Level of significance: 5%

Test-statistic:

𝑝̂ − 𝑝
𝑧=
𝑝𝑞
√
𝑛

Computation:
265
Where 𝑝̂ = 500 = 0.53

𝑝̂ − 𝑝 0.53 − 0.50
𝑍= = = 1.342
𝑝𝑞
√ √(0.50)(0.50)
𝑛 500

Critical region 1: Reject H0, if Z > Zα , Zα =1.645 at 5% level of significance.

12
Decision:

As Z < 1.645, we will not reject our null hypothesis.

At 10% level of significance

Critical region 1: Reject H0, if Z > Zα, Zα =1.28 at 10% level of significance.

Decision:

As Z > 1.28, we will reject our null hypothesis.

Chapter 13
9. An experiment was performed on a certain metal to determine if the strength is a function of
heating time (hours). Results based on 25 metal sheets are given below. Use the simple linear
regression model.
∑X = 50
∑X2 = 200
∑Y = 75
∑Y2 = 1600
∑XY = 400

Find the estimated y intercept and slope. Write the equation of the least squares regression line
and explain the coefficients. Estimate Y when X is equal to 4 hours. Also determine the standard
error, the Mean Square Error, the coefficient of determination and the coefficient of correlation.
Check the relation between correlation coefficient and Coefficient of Determination. Test the
significance of the slope.

Solution

Regression Equation

𝑦̂ = 𝑏0 + 𝑏1 𝑥
We will obtain the slope and intercept using the following formulas
𝑛 ∑ 𝑥𝑦 − ∑ 𝑥 ∑ 𝑦 25(400) − (50)(75)
𝑏1 = = = 2.5
𝑛 ∑ 𝑥 2 − (∑ 𝑥)2 25(200) − (50)2

𝑏0 = 𝑦̅ − 𝑏1 𝑥̅ = 3 − 2.5(2) = −2
𝑦̂ = 𝑏0 + 𝑏1 𝑥 = −2 + 2.5𝑥
The value of slope indicates that for one hour increase in heating time, strength will
increase by 2.5 units and intercept means that if heating time is zero , strength of metal
will be -2.

13
 Prediction
𝑦̂ = −2 + 2.5(4) = 8

Standard Error

∑ 𝑌 2 − 𝑏0 ∑ 𝑦 − 𝑏1 ∑ 𝑋𝑌
𝑆𝑒 = √ = 5.71
𝑛−2

Mean Square Error

𝑀𝑆𝐸 = (𝑆𝑒 )2 = 32.60

Coefficient of determination

(∑ 𝒀)𝟐
𝑺𝑺𝑻 = ∑ 𝒀𝟐 − = 𝟏𝟑𝟕𝟓
𝒏

𝑺𝑺𝑬 = ∑ 𝑌 2 − 𝑏0 ∑ 𝑦 − 𝑏1 ∑ 𝑋𝑌 = 750

𝑺𝑺𝑬 𝟕𝟓𝟎
𝑹𝟐 = 𝟏 − =𝟏− = 𝟎. 𝟒𝟓𝟓
𝑺𝑺𝑻 𝟏𝟑𝟕𝟓
Coefficient of Correlation

𝑛 ∑ 𝑥𝑦 − ∑ 𝑥 ∑ 𝑦
𝒓= = 0.6742
√[𝑛 ∑ 𝑥 2 − (∑ 𝑥)2 ][𝑛 ∑ 𝑦 2 − (∑ 𝑦)2 ]

Explanatory Power

The value of R2 is 0.455 that is less than 0.55, it means the power of the model is moderate.

Relationship between coefficient of determination and correlation

𝑟 2 = 𝑅2

(0.6742)2 = 0.455

Testing the significance of Slope

𝑯𝒐: β = 0 (There is no relation between X and Y).

𝑯𝒂 : β ≠ 0 ( There is relation between X and Y).
Level of significance: 5%

14
Test statistic:
𝑏−𝛽
𝑡=
𝑠𝑏
Computation:
𝑆𝑒 5.71
𝑠𝑏 = √ 2
=√ = 0.2390
∑(𝑥 − 𝑥̅ ) 100
𝑏 − 𝛽 2.5 − 0
𝑡= = = 10.46
𝑠𝑏 0.2390

Critical region: Reject H0, if |t| > 𝑡𝛼(𝑛−2) = 2.069 𝑎𝑡 5% level of significance and 23 degrees of
2
freedom.

Decision: As t > 3.182, we have strong evidence to reject the null hypothesis of no relation between
strength of metal and heating time.

10. Consumer Reports provided extensive testing and ratings for more than 100 HDTVs. An
overall score, based primarily on picture quality, was developed for each model. In general, a
higher overall score indicates better performance. The following (hypothetical) data show the
price and overall score for the ten 42-inch plasma televisions (Consumer Report data slightly
changed here):

Brand Price (X) Score (Y)

Dell 3800 50
Hisense 2800 45
Hitachi 2700 35
JVC 3000 40
LG 3500 45
Maxent 2000 28
Panasonic 4000 57
Phillips 3200 48
Proview 2000 22
Samsung 3000 30

Use the above data to develop and estimated regression equation. Compute Coefficient of
Determination and correlation coefficient and show their relation. Interpret the explanatory
power of the model. Estimate the overall score for a 42-inch plasma television with a price of
$3600 and perform significance test for the slope.

15
Solution

Price Score
X2 Y2 XY
(X) (Y)
3800 50 14440000 2500 190000
2800 45 7840000 2025 126000
2700 35 7290000 1225 94500
3000 40 9000000 1600 120000
3500 45 12250000 2025 157500
2000 28 4000000 784 56000

4000 57
16000000 3249 228000
3200 48 10240000 2304 153600
2000 22 4000000 484 44000
3000 30 9000000 900 90000
30000 400 94060000 17096 1259600

𝑦̂ = 𝑏0 + 𝑏1 𝑥
We will obtain the slope and intercept using the following formulas
𝑛 ∑ 𝑥𝑦 − ∑ 𝑥 ∑ 𝑦
𝑏1 = = 0.0133
𝑛 ∑ 𝑥 2 − (∑ 𝑥)2

𝑏0 = 𝑦̅ − 𝑏1 𝑥̅ = −0.045

𝑦̂ = 𝑏0 + 𝑏1 𝑥 = −0.045 + 0.0133𝑥
Coefficient of determination

(∑ 𝑌)2
𝑆𝑆𝑇 = ∑ 𝑌 2 − = 118914.2
𝑛

𝑺𝑺𝑬 = ∑ 𝑌 2 − 𝑏0 ∑ 𝑦 − 𝑏1 ∑ 𝑋𝑌 = 228.40

𝑆𝑆𝐸
𝑅2 = 1 − = 0.998
𝑆𝑆𝑇
Coefficient of Correlation

𝑛 ∑ 𝑥𝑦 − ∑ 𝑥 ∑ 𝑦
𝒓= = 0.999
√[𝑛 ∑ 𝑥 2 − (∑ 𝑥)2 ][𝑛 ∑ 𝑦 2 − (∑ 𝑦)2 ]

Explanatory Power

The value of R2 is 0.998 that is high showing that the fitted model is good.

16
Relationship between coefficient of determination and correlation

𝑟 2 = 𝑅2

(0.999)2 = 0.998

Testing the significance of Slope

𝑯𝒐: β = 0 (There is no relation between price and score).

𝑯𝒂 : β ≠ 0 ( There is relation between price and score).
Level of significance: 5%
Test statistic:
𝑏−𝛽
𝑡=
𝑠𝑏
Computation:
𝑏 − 𝛽 0.0133 − 0
𝑡= = = 68.39
𝑠𝑏 0.00020

Critical region: Reject H0, if |t| > 𝑡𝛼(𝑛−2) = 2.262 𝑎𝑡 5% level of significance and 9 degrees of
2
freedom.

Decision: As t > 2.262, we have strong evidence to reject the null hypothesis of no relation between price
and scores.

Prediction

𝑦̂ = −0.045 + 0.0133($3600) = 47.98

17