UNIVERSITY OF THE WEST INDIES, ST.

AUGUSTINE CAMPUS
DEPARTMENT OF ECONOMICS

SEMESTER I 2013-2014 ECON 2025 Tutorial Sheet #3

1. A radar unit observes an average of 9.6 speeding drivers per hour at a certain location
on the highway.
i. Mean and standard deviation of the distribution
ii. What is the probability that 3 or fewer speeding drivers being observed
in 10 minutes?
iii. What is the probability of a waiting time of less than 5 minutes
between observations of successive speeding drivers?

2.a. Find the values of P(X  2), P(X  - 8) and P(0.5  X < 3.5) when the density
function of the random variable X is given by
f(x) = x/3 for 0<x1
5(x – 4)/7 for 1x4
0 elsewhere.
b. Determine the value of the constant such that the function f(x) = cxe-x is a
probability density function for a random variable X defined on the interval x > 0
Hence compute the probability that X will assume a value between 2 and 4.5. Also,
find a ‘centre’ value for this random variable

3. Compute the approximate proportions of a sample that is expected to fall within the
intervals prescribed below in the case of a random variable X whose distribution is
known to be normally distributed with parameters μ and σ.
i. μ - σ and μ + σ
ii. μ - 2σ and μ + 2σ
iii. μ - 3σ and μ + 3σ

4. Consider the random variable X that possesses a Chi Square Distribution with 15
degrees of freedom.
a. Obtain the 20th and 80th percentiles of the distribution.
b. Compute the mean and standard deviation of the distribution.
c. Obtain the two percentiles for 10, 15, 20 and 25 degrees of freedom. What
conclusion can you draw from the comparison of the two sets of percentiles?

5. Consider the random variable Y that possesses a F- Distribution with parameters (6,16)
degrees of freedom.
a. Obtain the 5th and 95th percentiles of the distribution.
b. Compute the mean and standard deviation of the distribution.

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6. The length of time T required to complete a certain key task in house construction is
known to be exponentially distributed with a mean of 15 hours.
a. State the variance of this exponential distribution.
b. Recall the formula Var(X) = E(X2) – (E(X))2 from Level I. Use this
formula to find the expectation of T2.
c. The cost C of completing this task is related to the time required for
completion by the formula C = 100 + 40T + 3 T2. Find the expected
value of C.
d. Describe the steps that you will take in assessing the chance that the cost C
will exceed 2000.

7. How does level of affluence affect health care? In order to address one dimension of
the problem, a group of heart attack victims was drawn. Each was categorized as a low,
medium, or high income earner. Each was also categorized as having survived or died. A
demographer noted that in a certain country 21% fall into the low income group, and 49%
in the medium income group. Furthermore, an analysis of heart attack victims in the same
country reveals that 12% of low income people, 9% of medium income people, and 7%
of high income people die of heart attacks.

a. Name the random variables in this problem.

b. List the values assumed by each random variable.
c. What is the probability that a person chosen at random in the country will
fall in the high income group?
d. A person chosen at random was classified as a survivor of a heart attack.
Find the probability that this person comes from the low income group

8. The weekly amount spent for maintenance and repairs in a certain company have an
approximately normal distribution with mean of $4000 and a standard deviation of $300.

a. If the sum of $4500 is budgeted to cover repairs for the next week, what is
the probability that the actual costs will exceed the budgeted amount for
that week?
b. In any given year, find the number of weeks when the actual costs will
range between $3750 and $4400.
c. The Board of the company has approved the payment of a bonus to staff
whenever the actual cost falls below $3500. What in your view will be the
frequency of such bonus payments in a given year?

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9. A restaurant chain routinely surveys customers and, among other questions, asks each
customer whether he or she would return and rate the quality of food. Summarising
hundreds of questionnaires produced the table of joint probabilities below.
Rating Customer will return Customer will not return
Excellent 0.02 0.10
Fair 0.08 0.09
Good 0.35 0.14
Poor 0.20 0.02

a. What is the modal outcome in this survey?

b. Create a marginal probability distribution for the random variable ‘rating
of food quality’
c. What proportion of customers say that they will return and give an
favourable rating of the restaurant’s food?
d. What proportion of customers who say that they will return, rate the
restaurant’s food as good or excellent?