First Name ________________ Last Name _______________ Student Number _______________ 1

Acadia University
Faculty of Arts
DEPARTMENT OF ECONOMICS

Course: Econ 2613FA01 - Empirical Analysis in Economics & Business Fall 2022
Instructor: C. Burç Kayahan
ASSIGNMENT III
Notes:
 This assignment is due by 1:00PM ON WEDNESDAY, NOVEMBER 16th. Completed assignments, with your
name and ID clearly shown, should be submitted to the Assignment 3 submission link on ACORN. I strongly
recommend that you make a copy of your assignment before handing it in.
 Answers should be as complete as possible, SHOWING ALL STEPS AND ALGEBRAIC FORMULAS
USED.
 Group work is encouraged, but you MUST ENSURE that the final, submitted version of the assignment is your
OWN work.

Question 1: Prices of studio condominiums in the Cedar Lake development follow a normal distribution. The
average price of a studio condominium in the Cedar Lakes development is $230,000 and the standard deviation
is $20,000.
(7%) (a) Calculate the probability that a randomly chosen condominium in the Cedar Lakes development
will cost at least $215,000. Draw a graph to illustrate your answer.
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(7%) (b) You talk to a real estate agent who shows you a sample of 50 condominiums that are on sale in the
Cedar Lakes development. Calculate the probability that the average price of a condominium in your sample
lies between $234,000 and $228,000. Explain. Draw a graph to illustrate your answer.

(6%) (c) With the probability of 30%, the average price of a condominium in your sample will be less than
what amount? Explain. Draw a graph to illustrate your answer.
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Question 2: Answer the following questions.

(7%) (a) An environmental agency worries that a larger percentage of cars may be violating clean air
emissions standards. The agency hopes to check a sample of vehicles in order to estimate the percentage of
cars violating the emission standards. To gauge the size of the problem, the agency conducts a pilot study,
which revealed that 18 out of 72 cars had faulty emission systems. How many cars should be sampled in the
main study if the environmental agency would like to estimate the percentage of cars that violates the
emission standards with 95% level of confidence and with a margin of error of 5%? Would you need a larger
or smaller sample if the desired margin of error were lower? Explain.

(7%) (b) A medical researcher wants to investigate the amount of time it takes for patients’ headache pain to
be relieved after taking a new prescription painkiller. She plans to use statistical methods to estimate mean of
the population of relief times. She believes that the population is normally distributed with a standard
deviation of 42.3 minutes. How large a sample should she take to estimate the mean relief time within a 4-
minute margin of error with 99% level of confidence? Would you need a larger or smaller sample if the level
of confidence were smaller? Explain.
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Question 3: The provincial government in Nova Scotia is considering introducing a carbon tax in the province.
Past studies show that 51.2% of the Nova Scotians support the tax.
(5%) (a) The provincial government conducted a new survey in 2022 among a random sample of 1,240
respondents. Calculate the probability that majority of the respondents (i.e. more than 50% of the
respondents) in the 2022 sample are in favor of the carbon tax assuming that the proportion of the Nova
Scotian population that favors this initiative is 51.2%. Explain. Draw a graph to illustrate your answer.

(5%) (b) Assuming that the proportion of the Nova Scotian population that favors carbon tax is 51.2%, with
16% probability, the proportion of the respondents in the 2022 sample that supports the carbon tax will be less
than what percentage? Explain. Draw a graph to illustrate your answer.

(5%) (c) The probability is 40% that the proportion of respondents that favours the carbon tax in your sample
will be contained within what symmetrical limits of the true (i.e. population) proportion? Explain. Draw a
graph to illustrate your answer.
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Question 4: Nova Scotia Department of Tourism wants to estimate the proportion of visitors that plan to
camp in the province. In a survey of 700 visitors interviewed at the visitor information center, 200 indicated
that they are planning to camp in the province.
(4%) (a) Construct a 95% confidence interval estimate for the proportion of visitors that plan to camp in
Nova Scotia. Interpret your interval.

(6%) (b) Department of Tourism has a policy of reducing the camping fee at the provincial parks, if the
proportion of visitors who plan to camp in the province is less than 25%. Based on your sample, do you think
that the province will reduce the camping fees at the provincial parks? Would your answer be any different if
you used the 99% level of confidence to construct your interval instead. Explain.

(5%) (c) Evaluate the following statement: “A larger level of confidence and smaller sample size would
result in narrower confidence interval estimates.” Provide a clear explanation for your answer (i.e. Just true
or false would not be sufficient).
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Question 5: RCMP detachments are concerned about traffic speeds in school zones, hence they use speed-
measuring machines on roads to measure how fast the motorists are driving. Following speed measurements
(in kms/h) were reported by a speed-measuring machine placed at the school-zone in New Minas:
3 2 3 2
3 35 32 9 32 37 3 26 35 7 29 32
2 3 2 3
9 34 37 3 37 29 9 35 28 2 28 28
2 2 3 3
9 31 27 7 35 26 7 32 26 1 34 28
3 3 2 2
5 27 37 3 27 32 8 37 37 9 26 26
(5%) (a) Calculate the sample size, the sample mean and the sample standard deviation for your sample.
Sample size:
Sample mean:
Sample standard deviation:
(6%) (b) Using the information from your sample, construct a confidence interval estimate for the average
speed of motorists at the school-zone in New Minas at the 99% level of confidence. Interpret your interval.
Based on your interval estimates, do you have a reason to believe that motorists are breaking the law (i.e.
travel above the legal speed limit of 30 km/h)? Explain your answer.

(6%) (c) Calculate the proportion of motorists that travel beyond the legal speed limit in your sample.
Construct a confidence interval estimate for the true proportion of motorists that travel beyond the legal
speed limit (i.e. 30km/h) at the school-zone in New Minas at the 95% level of confidence. Interpret your
interval.
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Question 6: Suppose that you are interested in estimating the average amount a customer spends for dinner at
Paddy’s Pub in Kentville. In order to estimate the average spending in the population, you collect a random
sample of 60 expenditures, which are shown below:
$37 $26 $35 $36 $38 $38 $40 $41 $38 $39 $31 $31
$38 $28 $35 $31 $37 $24 $24 $29 $35 $34 $30 $26
$38 $42 $24 $39 $42 $37 $27 $38 $35 $26 $25 $38
$41 $42 $28 $43 $41 $28 $25 $34 $35 $34 $33 $25
$34 $43 $42 $41 $31 $35 $40 $30 $43 $24 $40 $30
(5%) (a) Calculate the sample size, the sample mean and the sample standard deviation for your sample.
Sample size:
Sample mean:
Sample standard deviation:
(7%) (b) Construct a confidence interval estimate of the average customer spending in the population at 95%
level of confidence. The owner of Paddy’s Pub in Kentville claims that the average customer spending for
dinner at his establishment is $35 or more. Evaluate the owner’s claim using your interval estimate.

(4%) (c) Would your conclusion to part (b) be different if the population standard deviation were known to be
$5.97? Make the necessary calculations and explain.

(2%) (d) At the 90% level of confidence, suppose that you collected 200 different samples and constructed
confidence intervals for the average customer spending in the population using the information from these
samples. How many of these intervals would not contain the true average customer spending in the population?