Course Title: STATISTICS FOR MANAGEMENT

Credit Units: 3

Course Code: QAM601

Module II Probability and Probability Distributions

Numerical for Practice

Book: Statistics for Business and Economics, Anderson, Sweeney, Williams, Cengage Learning, (12e)

Chapter 4: Introduction to Probability

Q6 An experiment with three outcomes has been repeated 50 times, and it was learned that E1 occurred
20 times, E2 occurred 13 times, and E3 occurred 17 times. Assign probabilities to the outcomes. What
method did you use?
Ans.
P(E1) = .40, P(E2) = .26, P(E3) = .34

The relative frequency method was used.

Q10. Many students accumulate debt by the time they graduate from college. Shown in the following
table is the percentage of graduates with debt and the average amount of debt for these graduates at four
universities and four liberal arts colleges (U.S. News and World Report, America’s Best Colleges,
2008).

a. If you randomly choose a graduate of Morehouse College, what is the probability that this
individual graduated with debt?
b. If you randomly choose one of these eight institutions for a follow-up study on student loans,
what is the probability that you will choose an institution with more than 60% of its graduates
having debt?
c. If you randomly choose one of these eight institutions for a follow-up study on student loans,
what is the probability that you will choose an institution whose graduates with debts have an
average debt of more than $ 30,000?
d. What is the probability that a graduate of Pace University does not have debt?
e. For graduates of Pace University with debt, the average amount of debt is $ 32,980. Considering
all graduates from Pace University, what is the average debt per graduate?
Ans
 a. Using the table provided, 94% of students graduating from Morehouse College have debt.

P(Debt) = .94

b. Five of the 8 institutions have over 60% of their graduates with debt.

P(over 60%) = 5/8 = .625

c. Two of the 8 institutions have graduates with debt who have an average debt more than $30,000.

P(more than $30,000) = 2/8 = .25

d. P(No debt) = 1 - P(Debt) = 1 - .72 = .28

e. This is a weighted average calculation. 72% graduate with an average debt of $32,980 and 28%
graduate with a debt of $0.

.72($32,980) + .28($0)
Average debt per graduate = = $23,746
.72 + .28

19. Do you think the government protects investors adequately? This question was part of an online
survey of investors under age 65 living in the United States and Great Britain (Financial Times/ Harris
Poll, October 1, 2009). The numbers of investors from the United States and Great Britain who
answered Yes, No, or Unsure to this question are provided below.

a. Estimate the probability that an investor in the United States thinks the government is not
protecting investors adequately.
b. Estimate the probability that an investor in Great Britain thinks the government is not protecting
investors adequately or is unsure the government is protecting investors adequately.
c. For a randomly selected investor from these two countries, estimate the probability that the
investor thinks the government is not protecting investors adequately.
d. Based on the survey results, does there appear to be much difference between the perceptions of
investors in the United States and investors in Great Britain regarding the issue of the
government protecting investors adequately?
Ans
a. A summary of the data provided in the exercise follows:
 United Total
Response States Great Britain

Yes 187 197 384

No 334 411 745

Unsure 256 213 469

Total 777 821 1598

Probability = 334/777 = .4299

b. Probability = (411 + 213)/821 = .76

c. Probability = (334 + 411) /1598 = .4662

d. The probability that an investor in the United States thinks the government is adequately protecting
investors is 187/777 =.2407; for investors in Great Britain the probability is 197/821 = .24. The two
probabilities are almost identical; thus, there does not appear to be a difference between the perceptions of
investors in these two countries with regard to the “Yes” response.

However, in part (a) we showed that the probability that an investor in the United States does not think the
government is adequately protecting investors is.4299, or approximately .43; for investors in Great Britain
the probability is 411/821 = .5006 or approximately .50. These results show a slightly higher probability that
an investor in Great Britain will say that the government is not protecting investors adequately.

25. The U.S. Census Bureau provides data on the number of young adults, ages 18– 24, who are living
in their parents’ home. 1 Let M = the event a male young adult is living in his parents’ home F = the
event a female young adult is living in her parents’ home If we randomly select a male young adult and
a female young adult, the Census Bureau data enable us to conclude P( M) = .56 and P( F) = .42 (The
World Almanac, 2006). The probability that both are living in their parents’ home is .24.
a. What is the probability at least one of the two young adults selected is living in his or her parents’
home?
b. What is the probability both young adults selected are living on their own (neither is living in their
parents’ home)?
Ans
Let M = male young adult living in his parents’ home

F = female young adult living in her parents’ home

a. P(M  F) = P(M) + P(F) - P(M  F)

= .56 + .42 - .24 = .74

 b. 1 - P(M  F) = 1 - .74 = .26

27. What NCAA college basketball conferences have the higher probability of having a team play in
college basketball’s national championship game? Over the last 20 years, the Atlantic Coast Conference
(ACC) ranks first by having a team in the championship game 10 times. The Southeastern Conference
(SEC) ranks second by having a team in the championship game 8 times. However, these two
conferences have both had teams in the championship game only one time, when Arkansas (SEC) beat
Duke (ACC) 76– 70 in 1994 (NCAA website, April 2009). Use these data to estimate the following
probabilities.
a. What is the probability the ACC will have a team in the championship game?
b. What is the probability the SEC will have team in the championship game?
c. What is the probability the ACC and SEC will both have teams in the championship game?
d. What is the probability at least one team from these two conferences will be in the championship
game? That is, what is the probability a team from the ACC or SEC will play in the championship
game?
e. What is the probability that the championship game will not a have team from one of these two
conferences?
Ans
Let A = the event the ACC has a team in the championship game

S = the event the SEC has a team in the championship game

10
a. P( A) = = .50
20

8
b. P( S ) = = .40
20

1
c. P( A  S ) = = .05
20

There is a low probability that teams from both the ACC and SEC will be in the championship game.

d. P( A  S ) = P( A) + P( S ) − P( A  S ) = .50 + .40 − .05 = .85

There is a high probability that a team from the ACC or SEC will be in the championship game.

e. P(Neither conference) = 1 − P( A  S ) = 1 − .85 = .15

In this case, teams will most likely come from the Big Ten (6), Big East (4), Pac-10 (4), or Big 12 (3). Numbers
shown are the number of times teams from these conferences have played in the national championship game
over the previous 20 years.
36. Jamal Crawford of the National Basketball Association’s Portland Trail Blazers is the best free-
throw shooter on the team, making 93% of his shots (ESPN website, April 5, 2012). Assume that late in
a basketball game, Jamal Crawford is fouled and is awarded two shots.
a. What is the probability that he will make both shots?
b. What is the probability that he will make at least one shot?
c. What is the probability that he will miss both shots?
d. Late in a basketball game, a team often intentionally fouls an opposing player in order to stop the
game clock. The usual strategy is to intentionally foul the other team’s worst free-throw shooter.
Assume that the Portland Trail Blazers’ center makes 58% of his free-throw shots. Calculate the
probabilities for the center as shown in parts (a), (b), and (c), and show that intentionally fouling the
Portland Trail Blazers’ center is a better strategy than intentionally fouling Jamal Crawford. Assume as
in parts (a), (b), and (c) that two shots will be awarded.
Ans
We have that P(Make the Shot) = .93 for each foul shot, so the probability that Jamal Crawford will make two
consecutive foul shots is that P(Make the Shot) P(Make the Shot) = (.93)(.93) = .8649.

b. There are three unique ways that Jamal Crawford can make at least one shot – he can make the first shot
and miss the second shot, miss the first shot and make the second shot, or make both shots. Since the event
“Miss the Shot” is the compliment of the event “Make the Shot,” P(Miss the Shot) = 1 – P(Make the Shot) = 1 –
.93 = .07. Thus:

P(Make the Shot) P(Miss the Shot) = (.93)(.07) = .0651

P(Miss the Shot) P(Make the Shot) = (.07)(.93) = .0651

P(Make the Shot) P(Make the Shot) = (.93)(.93) = .8649

.9951

c. We can find this probability in two ways. We can calculate the probability directly:

P(Miss the Shot) P(Miss the Shot) = (.07)(.07) = .0049

Or we can recognize that the event “Miss both Shots” is the compliment of the event “Make at Least One of the
Two Shots”, so

P(Miss the Shot) P(Miss the Shot) = 1 - .9951 = .0049

d. For the Portland Trail Blazers’ center, we have:

P(Make the Shot) = .58 for each foul shot, so the probability that the Portland Trail Blazers’ center will make two
consecutive foul shots is P(Make the Shot) P(Make the Shot) = (.58)(.58) = .3364.

Again, there are three unique ways that the Portland Trail Blazers’ center can make at least one shot – he can
make the first shot and miss the second shot, miss the first shot and make the second shot, or make both shots.
Since the event “Miss the Shot” is the compliment of the event “Make the Shot,” P(Miss the Shot) = 1 – P(Make
the Shot) = 1 – .58 = .42. Thus

P(Make the Shot) P(Miss the Shot) = (.58)(.42) = .2436

P(Miss the Shot) P(Make the Shot) = (.42)(.58) = .2436

P(Make the Shot) P(Make the Shot) = (.58)(.58) = .3364

.8236

We can again find the probability the Portland Trail Blazers’ center will miss both shots in two ways. We can
calculate the probability directly:

P(Miss the Shot) P(Miss the Shot) = (.42)(.42) = .1764

Or we can recognize that the event “Miss both Shots” is the compliment of the event “Make at Least One of the
Two Shots”, so

P(Miss the Shot) P(Miss the Shot) = 1 - .9951 = .1764

Intentionally fouling the Portland Trail Blazers’ center is a better strategy than intentionally fouling Jamal
Crawford.

38. Students in grades 3 through 8 in New York State are required to take a state mathematics exam. To
meet the state’s proficiency standards, a student must demonstrate an understanding of the mathematics
expected at his or her grade level. The following data show the number of students tested in the New
York City school system for grades 3 through 8 and the number who met and did not meet the
proficiency standards on the exam (New York City Department of Education website, January 16,
2010).

a. Develop a joint probability table for these data.

b. What are the marginal probabilities? What do they tell about the probabilities of a student meeting or
not meeting the proficiency standards on the exam?
c. If a randomly selected student is a third grader, what is the probability that the student met the
proficiency standards? If the student is a fourth grader, what is the probability that the student met the
proficiency standards?
d. If a randomly selected student is known to have met the proficiency standards on the exam, what is
the probability that the student is a third grader? What is the probability if the student is a fourth grader?
Ans
a. The data table with row and column totals is shown below. Note that a total of 423,392 students took
the state mathematics exam.

Met Proficiency
Standards?

Grade Yes No Total

3 47,401 23,975 71,376

4 35,020 34,740 69,760

5 36,062 33,540 69,602

6 36,361 32,929 69,290

7 40,945 29,768 70,713

8 40,720 31,931 72,651

Total 236,509 186,883 423,392

The joint probability table follows. The probabilities were computed by dividing each entry in the above
table by the total number of students taking the state mathematics exam: 423,392.

Met Proficiency Standards

Grade Yes No Total

3 .11196 .05663 0.16858

4 .08271 .08205 0.16476

5 .08517 .07922 0.16439

6 .08588 .07777 0.16365

7 .09671 .07031 0.16702

8 .09618 .07542 0.17159

Total .55861 .44139 1.00000

For example, let G3 = event that a student is in the third grade and S = event that the student met the
proficiency standards on the exam. The joint probability in the Grade 3 row and the Yes column is

P(G3  S ) = 47,401/ 423,392 = .11196

 b. The column marginal probabilities are .55861 and .44139. The marginal probability of .55861 is the
probability that a randomly selected student met the proficiency standards on the exam and the marginal
probability of .44139 is the probability that a randomly selected student did not meet the proficiency
standards on the exam. There is a slightly better than 50-50 chance that a student met the proficiency
standards on the exam.

The row marginal probabilities of .16858, .16476, and so on show the probability that a random selected
student is in each grade. Because the number of students in each grade is approximately the same, the
probabilities are very similar. Note that the highest probability of .17159 is the probability that a
randomly selected student who took the exam is in the 8th grade.

P( S  G3) .11196
c. P( S G3) = = = .6641
P(G3) .16858

Let G4 = event that a randomly student is in the fourth grade.

P( S  G4) .08271
P( S G4) = = = .5020
P(G4) .16476

P(G3  S ) .11196
d. P(G3 S ) = = = .2004
P( S ) .55861

P(G 4  S ) .08271
P(G 4 S ) = = = .1481
P( S ) .55861

40. The prior probabilities for events A1 and A2 are P( A1) = .40 and P( A2) = .60. It is also known that
P( A1 ⋂ A2) = 0. Suppose P( B | A1) = .20 and P( B | A2) = .05.

a. Compute P( B ⋂ A1), P( B ⋂ A2), and P( B ⋂ A3).

b. Apply Bayes’ theorem, equation (4.19), to compute the posterior probability P( A2 | B).
c. Use the tabular approach to applying Bayes’ theorem to compute P( A1 | B), P( A2 | B), and P( A3 |
B).
Ans
a. P(B  A1) = P(A1)P(B | A1) = (.20)(.50) = .10
P(B  A2) = P(A2)P(B | A2) = (.50)(.40) = .20
P(B  A3) = P(A3)P(B | A3) = (.30)(.30) = .09
.20
b. P(A 2 B) = = .51
.10 + .20 + .09

c.

Events P(Ai) P(B | Ai) P(Ai  B) P(Ai | B)

A1 .20 .50 .10 .26

A2 .50 .40 .20 .51

A3 .30 .30 .09 .23

1.00 .39 1.00

54. In February 2012, the Pew Internet & American Life project conducted a survey that included several
questions about how Internet users feel about search engines and other websites collecting information about them
and using this information either to shape search results or target advertising to them (Pew Research Center,
March 9, 2012). In one question, participants were asked, “If a search engine kept track of what you search for,
and then used that information to personalize your future search results, how would you feel about that?”
Respondents could indicate either “Would not be okay with it because you feel it is an invasion of your privacy”
or “Would be okay with it, even if it means they are gathering information about you.” Frequencies of responses
by age group are summarized in the following table.

a. What is the probability a survey respondent will say she or he is not okay with this practice?

b. Given a respondent is 30– 49 years old, what is the probability the respondent will say she or he is okay with
this practice?

c. Given a respondent says she or he is not okay with this practice, what is the probability the respondent is 50 +
years old?

e. Is the attitude about this practice independent of the age of the respondent? Why or why not?

f. Do attitudes toward this practice for respondents

Ans

a. .7766

P(OKAY  30 − 49) 0.0907

b. P(OKAY 30 − 49) = = = 0.2852
P(30 − 49) 0.3180

P(50 + NOT OKAY) 0.4008

c. P(50 + NOT OKAY) = = = 0.5161
P(NOT OKAY) 0.7766

d. The attitude about this practice is not independent of the age of the respondent. We can show this in
several ways. One example is to use the result from part (b). We have

P ( OKAY 30 − 49) = 0.2852

and
P ( OKAY ) = 0.2234

If the attitude about this practice were independent of the age of the respondent, we would expect these
probabilities to be equal. Since these probabilities are not equal, the data suggests the attitude about this
practice is not independent of the age of the respondent.

e. Respondents in the 50+ age category are far more likely to say this practice is NOT OKAY than are
respondents in the 18-29 age category:

P ( NOT OKAY  50 + ) 0.4008

P ( NOT OKAY|50+ ) = = = 0.8472
P ( 50+ ) 0.4731
 P ( NOT OKAY 18-29 ) 0.1485
P ( NOT OKAY|18-29 ) = = = 0.7109
P (18-29 ) 0.2089

59. An oil company purchased an option on land in Alaska. Preliminary geologic studies assigned the following
prior probabilities. P( high-quality oil) = .50 P( medium-quality oil) = .20 P( no oil) = .30

a. What is the probability of finding oil?

b. After 200 feet of drilling on the first well, a soil test is taken. The probabilities of finding the particular type of
soil identified by the test follow.

P( soil | high-quality oil) = .20

P( soil | medium-quality oil) = .80

P( soil | no oil) = .20

How should the firm interpret the soil test? What are the revised probabilities, and what is the new probability of
finding oil?

a. P(Oil) = .50 + .20 = .70

b. Let S = Soil test results

Events P(Ai) P(S | Ai) P(Ai  S) P(Ai | S)

High Quality (A1) .50 .20 .10 .31

Medium Quality (A2) .20 .80 .16 .50

No Oil (A3) .30 .20 .06 .19

1.00 P(S) = .32 1.00

P(Oil) = .81 which is good; however, probabilities now favor medium quality rather than high quality oil.