Chapters 8-9

DSME 2011 D, G and H

Assignment 3

Assignment 3 is due by Nov 15 (F) 5pm. Please put a hardcopy in the drop box in 9/F, CYT. You can get a
maximum of 100 points for this assignment. Late submission is accepted with a deduction of at least 5
points. There is an Excel file named Facebook Time on Blackboard for Question 14.

Section I: Multiple Choice

1) It is desired to estimate the mean total compensation of CEOs in the Service industry. Data were randomly
collected from 18 CEOs and the 95% confidence interval was calculated to be ($2,181,260, $5,836,180).
Based on the interval above, do you believe the mean total compensation of CEOs in the Service industry is
more than $3,000,000?

A) Yes, and I am 95% confident of it.

B) Yes, and I am 78% confident of it.

C) I cannot conclude that the mean exceeds $3,000,000 at the 95% confidence level.

D) I am 95% confident that the mean compensation is $3,000,000.

Answer: C) I cannot conclude that the mean exceeds $3,000,000 at the 95% confidence level.

2) A university dean is interested in determining the proportion of students who receive some sort of
financial aid. Rather than examine the records for all students, the dean randomly selects 200 students and
finds that 118 of them are receiving financial aid. If the dean wanted to estimate the proportion of all
students receiving financial aid to within 3% with 99% reliability, how many students would need to be
sampled?

A) n = 1,844

B) n = 1,435

C) n = 1,784

D) n = 1,503

Answer: C) n = 1,784

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3) Suppose a 95% confidence interval for μ turns out to be (1,000, 2,100). Give a definition of what it means
to be "95% confident" as an inference.

A) 95% of the observations in the sample fall in the given interval.

B) 95% of the observations in the entire population fall in the given interval.

C) In repeated sampling, the population parameter would fall in the given interval 95% of the time.

D) In repeated sampling, 95% of the intervals constructed would contain the population mean.

Answer: D) In repeated sampling, 95% of the intervals constructed would contain the population mean.

SCENARIO 9-1

Microsoft Excel was used on a set of data involving the number of defective items found in a random sample
of 46 cases of light bulbs produced during a morning shift at a plant. A manager wants to know if the mean
number of defective bulbs per case is greater than 20 during the morning shift. She will make her decision
using a test with a level of significance of 0.10. Below was an extract of the computer printout:

4) Referring to Scenario 9-1, what critical value should the manager use to find the rejection region?

A) 1.6794

B) 0.6800

C) 1.3006

D) 1.3011

Answer: C) 1.3006

5) A survey claims that 9 out of 10 doctors recommend aspirin for their patients with headaches. To test this
claim against the alternative that the actual proportion is less than 0.90, a random sample of 100 doctors
results in 83 who indicate that they recommend aspirin. Compute the test statistic.

A) -2.33

B) -1.86

C) -0.07

D) -4.12

Answer: A) -2.33

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6) The t distribution

A) approaches the normal distribution as the sample size increases.

B) has more area in the tails than does the normal distribution.

C) assumes the population is normally distributed.

D) All of the above.

Answer: D) All of the above

7) An entrepreneur is considering the purchase of a coin-operated laundry. The current owner claims that
over the past 5 years, the mean daily revenue was $675 with a population standard deviation of $75. A
sample of 30 days reveals a daily mean revenue of $625. If you were to test the null hypothesis that the daily
mean revenue was $675 and decide not to reject the null, what can you conclude?

A) There is enough evidence to conclude that the daily mean revenue was $675.

B) There is not enough evidence to conclude that the daily mean revenue was $675.

C) There is enough evidence to conclude that the daily mean revenue was not $675.

D) There is not enough evidence to conclude that the daily mean revenue was not $675.

Answer: D) There is not enough evidence to conclude that the daily mean revenue was not $675.

8) Private colleges and universities rely on money contributed by individuals and corporations for their
operating expenses. Much of this money is put into a fund called an endowment, and the college spends
only the interest earned by the fund. A recent survey of 8 private colleges in the United States revealed the
following endowments (in millions of dollars): 60.2, 47.0, 235.1, 490.0, 122.6, 177.5, 95.4, and 220.0.
Summary statistics yield = 180.975 and S = 143.042. Calculate a 95% confidence interval for the mean
endowment of all the private colleges in the U.S. assuming a normal distribution for the endowments.

A) $180.975 ± $99.123

B) $180.975 ± $116.621

C) $180.975 ± $94.066

D) $180.975 ± $119.586

9) In hypothesis testing,

A) the smaller the Type I error, the smaller the Type II error will be

B) the smaller the Type I error, the larger the Type II error will be

C) Type II error will not be effected by Type I error

D) the sum of Type I and Type II errors must equal to 1

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10) For a two-tail test, the p-value is the probability of obtaining a value for the test statistic as

A) likely as that provided by the sample

B) unlikely as that provided by the sample

C) likely as that provided by the population

D) unlikely as that provided by the population

Section II: Short Questions

11) A bottled water distributor wants to estimate the amount of water contained in 1-gallon bottles
purchased from a nationally known water bottling company. The water bottling company’s specifications
state that the standard deviation of the amount of water is equal to 0.02 gallon. A random sample of 50
bottles is selected, and the sample mean amount of water per 1-gallon bottle is 0.995 gallon.

a. Construct a 98% confidence interval for the population mean amount of water in a 1-gallon bottle.

b. From the result of part (a), do you think the distributor has a right to complain to the water bottling
company? Why?

c. Do you have to assume that the population amount of water per bottle is normally distributed? Explain
briefly.

12) The management of a school wants to find out the absenteeism rate of the students in all of its 10
branches. They selected a random sample of 100 children and found that on an average there was an
absenteeism rate of 7% in a semester. Construct a 95% confidence interval estimate for the population

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proportion of the students who are absent from the school in this semester. What will be the results if the
sample size changes to 500? What does this confidence interval depict?

13) An information technology (IT) consulting firm specializing in healthcare solutions wants to study
communication deficiencies in the health care industry. A random sample of 70 health care clinicians reveals
the following:

 Time wasted in a day due to outdated communication technologies: x́ = 45 minutes, S = 10 minutes.

 Thirty-six health care clinicians cite inefficiency of pagers as the reason for the wasted time.

a. Construct a 99% confidence interval estimate for the population mean time wasted in a day due to
outdated commination technologies.

b. Construct a 95% confidence interval estimate for the population proportion of health care clinicians who
cite inefficiency of pagers as the reason for the wasted time.

14) An article appearing in The Exponent, an independent college newspaper published by the Purdue
Student Publishing Foundation, reported that the average American college student spends 1 hour (60
minutes) on Facebook daily. (Data extracted from bit.ly/QqQHow.) In order to test the validity of this
statement, you select a sample of 30 Facebook users at your college. The results for the time spent on
Facebook per day (in minutes) are stored in the excel workbook named Facebook Time.

a. Is there evidence that the population mean time spent on Facebook per day is different from 60 minutes?
Use the p-value approach and a level of significance of 0.05.

b. What assumption about the population distribution is needed if the sample size is smaller than 30?

c. Make a list of the various ways you could evaluate the assumption noted in (b).

15) A cellphone provider has the business objective of wanting to estimate the proportion of subscribers
who would upgrade to a new cellphone with improved features if it were made available at a substantially
reduced cost. Data are collected from a random sample of 500 subscribers. The results indicate that 135 of
the subscribers would upgrade to a new cellphone at a reduced cost.

a. At the 0.05 level of significance, is there evidence that more than 20% of the customers would upgrade to
a new cellphone at a reduced cost?

b. How would the manager in charge of promotional programs concerning residential customers use the
results in (a)?

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