UNIVERSITY OF DAR ES SALAAM

BUSINESS SCHOOL
DEPARTMENT OF GENERAL MANAGEMENT
ASSIGNMENT ONE: PROBABILITY
SUBMISSION DEADLINE: November 17, 2021, at 11:00 HRS

INSTRUCTIONS:
i) This assignment consists of 6 questions. Attempt all.
ii) This is a group assignment. Form your groups with not more than 10 members. An
assignment with more than 10 members will not be accepted.
iii) For grading purposes, 2 questions will be picked at random for marking.
iv) Marks will be awarded based on the precision of procedures, the correctness of
answers and the neatness of the work.
v) The submission deadline for this assignment is November 17, 2021, at 11:00 HRS.
vi) Submission will be done through the course instructor, either in class after the
lecture or to my office (Block C, Room 600) in 30 minutes after the lecture (i.e.
11:30.
vii) All assignments submitted after the deadline will be treated as no submission
and therefore attract zero marks

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Question 1
In the efforts to reduce road accidents in Tanzania, the traffic police have launched a new
program, in which drivers who are found with traffic offences three times are given the option
of whether to attend a special training program or to pay a fine of 200,000 Tanzanian shillings.
Suppose that 20% of all drivers in Dar es Salaam were found with traffic offences three times
within the past year. Assume in addition that 80% of those found with three traffic offences
attended the training program so that they would not have to pay the fine. If a driver from Dar
es Salaam is randomly selected, what is the probability that he or she found with three traffic
offences and attend a training program?

Question 2
A laboratory blood test is 99 per cent effective in detecting a certain disease when it is, in fact,
present. However, the test also yields a “false positive” result for 1 per cent of the healthy
persons tested. (That is, if a healthy person is tested, then, with probability .01, the test result
will imply he or she has the disease.) If .5 per cent of the population actually has the disease,
what is the probability that a person has the disease given that his test result is positive?

Question 3
Due to the increasing number of customers, MTAKUJA commercial Bank located at the
University of Dar es Salaam has been facing the problem of long customers’ queues since the
beginning of this year. The Branch manager decided to conduct a small study to determine the
cause of this problem. The study concluded that most of its bank tellers were slow and less
efficient. However, the study recommended that the long queues would decrease substantially
if at least two of its three banks tellers are operating efficiently. Therefore, to solve this problem
the bank came up with the new policy that each bank taller should process at least 25 customers
per hour. The probability that the first, second and third bank tellers will fail to comply with the
new policy is 0.12, 0.09 and 0.1 respectively. Assume that the three counters at MTAKUJA
bank operate independent of each other, find the probability that the queues will decrease
substantially.

Question 4
The probability that MICRONIX SYSTEMS salesperson sells a computer to a prospective
customer on the first visit is 0.4. If the salesperson fails to make the sale on the first visit, the
probability that the sale will be made on the second visit is 0.65. The salesperson never visits a
prospective customer more than twice. Find the probability that the salesperson will make a
sale to a particular customer

Question 5
NBC Co. Ltd. trades in a certain perishable item. Each item costs Tshs 1,500 and it is sold at Tshs
2,500. Any item not sold by the end of the day is disposed off for Tshs 1,000. The Company
forecasts the following daily demand levels for the item:
20,000, 30,000, 40,000, 50,000 and 60,000
40,000 items is the most likely demand and 20,000 is half as likely; the demand for 30,000 units
is three quarters as likely. The demand for 50,000 items is one quarter as likely and the demand
for 60,000 items is half as likely.

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Required:
(i) Use the EMV decision criterion to choose the optimal supply level.
(ii) Use the EOL criterion to choose the optimal supply level.
(iii) Use the maximum likelihood criterion to choose the optimal level.
(iv) Determine the Expected Value of the Perfect Information (EVPI)

Question 6
A manufacturer is presented with a proposal for a new product and must decide whether to
develop it. The cost of the development project is 2 million dollars with a probability of 0.7 that
the project will be successful. If the product is successfully developed, the manufacturer must
decide whether to begin manufacturing the product at a high level or a low level. If demand is
high, the incremental profit given a high level of manufacturing is 7 million dollars and a given
low level of manufacturing is 1.5 million dollars. If demand is low, the incremental profit given
a high level of manufacturing is 1 million dollars and a given low level of manufacturing is 1.5
million dollars. These incremental profit values are before subtraction of the 2 million dollars’
development cost and thus are gross figures. The probability that the market will be high is
estimated as equal to 0.40, and that it will be low as equal to 0.6.

Required:
(i) Draw a decision tree for this product development problem.
(ii) Advise the manufacturer on the decision to take.