SMMD: Practice Problem Set 3

Topics: Sampling and Confidence Intervals

1. A book publisher monitors the size of shipments of its textbooks to university bookstores.
For a sample of texts used at various schools, the 95% confidence interval for the size of the
shipment was 250 ± 45 books. Which, if any, of the following interpretations of this interval
are correct?
A. All shipments are between 205 and 295 books.
B. 95% of shipments are between 205 and 295 books.
C. The procedure that produced this interval generates ranges that hold the population
mean for 95% of samples.
D. If we get another sample, then we can be 95% sure that the mean of this second
sample is between 205 and 295.

(Q2-Q3) To prepare a report on the economy, analysts need to estimate the percentage of
businesses that plan to hire additional employees in the next 60 days.

2. How many randomly selected employers (minimum number) must we contact in order to
guarantee a margin of error of no more than 4% (at 95% confidence)?
A. 600
B. 400
C. 550
D. 1000

3. Suppose we want the above margin of error to be based on a 98% confidence level. What
sample size (minimum) must we now use?
A. 1000
B. 757
C. 848
D. 543

(Q4-Q5) Mark Semmes, owner of the Aurora Restaurant, is considering purchasing new
furniture. To help him decide on the amount he can afford to invest in tables and chairs, he
wishes to determine the average revenue per customer. The checks for 9 randomly sampled
customers had an average of £18.30 and a standard deviation of £6.30.

4. Construct a 95 percent confidence interval for the average check per customer.
A. [13.46, 23.14]
B. [13.87, 22.77]
C. [16.83, 19.77]
D. None of the Above

5. Which of the following is the minimum sample size (rounded to the nearest tens) at which
the (approximate) margin of error in his estimation will not exceed £1. Assume the same
 level of confidence as in the previous question? [Hint: You can consider the current sample
of 9 checks to be your pilot sample for calculation purpose.]
A. 140
B. 150
C. 160
D. 170

(Q6-Q7) Gillette recently announced plans to launch a new 3-edged razor, called the MACH3.
The company spent 6 years and more than $750 million developing this razor. The new razor
will sell for approximately $5 with replacement cartridges selling for $1.35 each, a 35% premium
over Gillette’s flagship two-blade Sensor razor. The Wall Street Journal (April 14, 1998) calls the
product a “calculated gamble” and notes that “Gillette’s master plan has little room for error”.

6. Because of the great secrecy surrounding the development of the razor, Gillette has not done
extensive market research. In fact, they have tested the new razor on a sample of only 100
members of the target population (“men who shave”), each of whom signed a non-
disclosure agreement. In this sample, 65 indicated that they prefer the MACH3 to the Sensor
razor. Use this sample data to construct a 95% confidence interval for the proportion of
“men who shave” who prefer the MACH3 to the Sensor.
A. [0.572, 0.728]
B. [0.557, 0.743]
C. [0.49, 0.81]
D. None

7. Now that the razor has been announced, Gillette wants to gather more information to
improve the accuracy of its market share estimates. Suppose Gillette wants to survey
enough “men who shave” to reduce the 95 percent confidence interval of part (a) to a width
of ± 2%. How many “men who shave” must they sample?
A. 2401
B. 1692
C. 1667
D. None