NEW YORK UNIVERSITY DEPARTMENT OF ECONOMICS ECON-UB.18.

011: Statistics, Fall 2011 REVIEW PROBLEMS: SET 1 Problem 1 The mean and standard deviation of a list of numbers are 50 and 10, respectively. Suppose that the number 20 is added to each number. What are the new values of the following descriptive measures? A) the mean, the standard deviation, the variance. B) Briey explain your answers to A). Now suppose that each number on the original list was multiplied by the number 2. What are the new values of the following descriptive measures? C) The mean, the standard deviation, the variance. D) Briey explain your answers to C). E) Briey explain the dierences between your answers to A). and C).

Problem 2 A list of 40 observations x1 ...x40 has a sample mean of 32 and the sample variance of 36. A) How many observations on the list have values between 20 and 44. B) Explain how each number on the list should be transformed so that the transformed list has a mean of zero.

C) Suppose that it was discovered that there is a 41st observation was missing when we formed the list. This value, of the 41st happens to be numerically equal to 35. What is the mean of the whole list of 41 numbers? Problem 3 Two marbles are drawn at random and without replacement from a box containing two blue marbles and three red marbles. A) List the sample points for this experiment. B) Assign probabilities to each sample point. C) Determine the probability of observing each of the following events: A:{Two blue marbles are drawn} B: {One red and one blue marble are drawn} C: {Two red marbles are drawn} D) Briey but carefully explain the rules of probability that you used to compute the probabilities of each event in part C). E) Are events A and B independent? Briey explain.

Problem 4 Most companies oer their employees a variety of health plans to choose from: preferred provider organizations (PPO), health maintenance organization (HMO) and fee for service (FFS) plans. A survey of companies employing a total of 10,000 employees yielded the following information on employees health plans classied by the company size. Company Size FFS PPO HMO Small 15 25 10 Medium 70 80 100 Large 3 500 3 000 3 200 Dene the following events: A: {Observe an employee that chose fee-for-service (FFS)} B: {Observe an employee from a small company} 2

A) Find () B) Find ( ) C) Find ( ) D) Are events A and B independent? Briey Explain. Suppose that the annual costs of insurance per employee in small companies is as follows: $200 for FFS, $100 for PPO, and $50 for HMO. E) What is the mean cost of insurance for a small company? Dene an appropriate random variable and compute its expected value. F) What is the standard deviation of the cost of insurance for a small company?

Problem 5 Suppose that you agree to play the following game involving one roll of a fair die: You agree to pay $9 if you get 1 or 2. You agree to pay $12 if you get 3. You will be paid $18 if you get a number greater than 3. A) Would you expect to win or lose money? B) What is the variance and the standard deviation of your payo in this game?