Midterm Exam

Subject: Economic Statistics (INS2004)

Prob 1: A survey of the business school graduates undertaken by a university placement office
asked, among other questions, in which area each person was employed. The areas of
employment are: Accounting (1); Finance (2); General management (3); Marketing /Sales (4);
Other (5).
Additional questions were asked about job satisfaction (4 = very, 3 = quite, 2 = little, 1 = none).
The placement office wants to know the following: Are area of employment and job satisfaction
related?
Produce a cross-classification table showing the row relative frequencies with “Area” to be
Row Labels, “Satisfaction” to be Column Labels. Also produce a bar chart from this table to
answer the question above.

Prob 2: A sociologist theorized that people who watch television frequently are exposed to many
commercials, which in turn lead them to buy, resulting in increasing debt. To test this belief, a
sample of 420 families was drawn. For each, the total debt ($) and the number of hours
the television is turned on per week were recorded.

a) Calculate the covariance and the coefficient of correlation between the two variables. Is the
theory true based on this sample?
b) Construct a scatter diagram on Excel with the number of hours the television is turned on per
week on the horizontal axis in order to find the slope of the regression line and the coefficient
of determination. Check the relationship between the covariance matrix, the correlation
matrix, and the scatter diagram.

Prob 3: To help make a decision about expansion plans, the director of a music company needs
to know how many CDs teenagers buy annually. He believes that the average number of CDs a
teenager buys annually is less than 5. Suppose that he randomly selected 230 teenagers and asked
each to report the number of CDs purchased in the previous 12 months.
Do these data provide sufficient evidence at the 4% significance level to support the director’s
belief?

Prob 4: Before deciding which of two types of stamping machine should be purchased, the plant
manager of an automotive parts manufacturer wants to determine the number of units that each
produces. The two machines differ in cost, reliability and productivity. The firm’s accountant has
calculated that machine A must produce 25 more non-defective units per hour than machine B to
warrant buying machine A. To help decide, both machines were operated for 24 hours. The total
number of units and the number of non-defective units produced by each machine per hour were
recorded.
These data are recorded in the following way: column 1 = total number of units produced by
machine A; column 2 = number of defectives produced by machine A; column 3 = total number
of units produced by machine B; column 4 = number of defectives produced by machine B.
Use 4% significance level to determine which machine should be purchased?