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ECON 3300 Test 2 Reviews
ECON 3300 Test 2 Reviews
States of nature
(amount of rainfall)
Small
Moderate Large
amount
amount
amount
400
500
700
550
550
550
150
600
800
4. A large police department in a metropolitan area is considering changing from full-size to mid-size cars, with
three different mid-size car models under consideration. Several cars of each model are loaned to the
department by the respective manufacturers. Each car was randomly assigned to a different police officer
and--subsequent to being driven for 5,000 miles--the operating cost per mile (in cents) for each car was
determined. The sample data and the results of a one-way ANOVA generated using Excel are given below.
(note: The one-way ANOVA assumptions are deemed adequately met.) Let 1, 2, and 3 denote the mean
operating cost per mile of all model 1 cars, all model 2 cars, and all model 3 cars, respectively.
A
B
C
D
E
F
1 Model 1
Model 2
Model 3
Anova: Single Factor
2
38.2
32
41.4
3
40.5
33.5
43.1
SUMMARY
4
37.6
30.3
42.7
Groups
Count
5
36.1
32.6
42.5
Model 1
8
6
38
32.4
46
Model 2
6
7
39.4
33.2
44
Model 3
7
8
39.2
43.8
9
37.8
10
ANOVA
11
Source of Variation
SS
12
Between Groups 392.6495
13
Within Groups
31.61048
14
15
Total
424.26
Sum
Average
306.8
38.35
194 32.33333
303.5 43.35714
df
Variance
1.788571
1.286667
2.109524
MS
F
2 196.3248 111.7935
18 1.756138
P-value
F crit
7.07604E-11 3.554561
20
(a) Show the major steps in applying the p-value approach to hypothesis testing to test
H0: 1 = 2 = 3
(b) Using a family confidence level of at least 95%, get and interpret in the context of the problem a
Bonferroni family of confidence intervals for 1 - 2, 1 - 3, and 2 - 3.
5. Below are the sales of storage sheds by Rupert Home & Garden Supply Company over the past 7 months.
Month
1
2
3
4
5
6
7
Sales (# of
storage sheds)
19
23
18
22
24
20
17
3
6. Below are the student enrollments in Business Statistics at a public university for the past 5 fall, spring, and
summer terms. The linear trend in the annual enrollments is Trend t = 92.3t + 762.1
Spring term
Summer term
Fall term
total
2010
324
169
354
847
2011
376
194
387
957
2012
398
211
428
1037
2013
421
238
475
1134
2014
460
250
510
1220
total
1979
1062
2154
(a) Rely on the linear trend line to forecast the student enrollment for 2015.
(b) Determine and apply seasonal factors to subside the forecast for 2015 into forecasts of student enrollment for
the spring, summer, and fall terms of 2015.
7. What component of an annual time series is reflected in a line graph by consecutive upward and downward
swings, each over a multi-year time period?
8. What are the assumptions of a one-way ANOVA?
Answers:
1.
Regret (in $1000s)
Planting
Alternatives
Corn & cotton
Peanuts
Squash & beans
States of nature
(amount of rainfall)
Small
Moderate Large
amount
amount
amount
400
550
150
500
550
600
700
550
800
States of nature
(amount of rainfall)
Small
Moderate Large
amount
amount
amount
150
100
100
0
50
250
400
0
0
Worst
possible
profit
400
550 (best)
150
Hurwicz
weighted
value(=.8)
640
550
670 (best)
Maximum
possible
regret
150 (min)
250
400
(a) peanuts
(b) squash & beans
(c) corn & cotton
2.(a) peanuts, with an expected profit of $550 K
Calculations: EV(Corn & cotton) = (.50)(400) + (.40)(500) + (.10)(700) = $470 K
EV(Peanuts) = (.50)(550) + (.40)(550) + (.10)(550) = $550 K
EV(Squash & beans) = (.50)(150) + (.40)(600) + (.10)(800) = $395 K
(b) EV with PI = (.50)(550) + (.40)(600) + (.10)(800) = $595 K
EVPI = $595 K - $550 K = $45 K
4
3(a).
note: unit on tree is $1000
success (.7)
390
270
failure (.3)
895
-10
commercial cert.(.30)
326
682
seek cert.
-35
326
success (.5)
failure (.5)
-30
-30
(b) Develop the smoke detector; if successful, seek certification. That strategy has an expected net profit of
$326,000.
(c) The risk profile of the strategy in (b) is:
Possible net profit probability
(in $1000)
-35
.05 [(.5)(.10)]
-30
.50
695
.30 [(.5)(.60)
895
.15 [(.5)(.30)]
4(a) H0: 1 = 2 = 3
MSTr
= 111.79
MSE
1 - 2
1 - 3
2 - 3
CI for j h = x j x h t (
/ m) / 2
MSE / n j MSE / nh
-9.1)
We are at least 95% confident that the mean operating cost per mile is: between 4.1 and 7.9 cents lower for
model 2 than for model 1 cars; between 3.2 and 6.8 cents lower for model 1 than for model 3 cars; and between
9.1 and 13.0 cents lower for model 2 than for model 3 cars. (So we conclude that, from an operating cost per
mile standpoint, and on average, model 2 cars are the best, model 1 cars are second best, and model 3 cars are
the worst.)
5
24 20 17
20.3 20 storage sheds
3
(a)(2) (.5)(17) + (.28)(20) + (.22)(24) = 19.38 19 storage sheds
5. (a)(1)
ES forecast
( = .3)
19
20.2
19.54
20.278
21.395
20.977
19.784
Squared
error
16
4.84
6.052
13.853
1.946
15.817
Absolute
% error
17.391%
12.222%
11.182%
15.508%
6.975%
23.394%
9.751
14.445%
6. (a) Trend forecast of enrollment in 2015 (t = 6) = 92.3(6) + 762.1 = 1315.9 1316 students
1979
(1315.9) 501 students
5195
1062
(1315.9) 269 students
Forecast for summer term of 2015 =
5195
2154
(1315.9) 546 students
Forecast for fall term of 2015 =
5195
7. cyclical
(b) Forecast for spring term of 2015 =