MINISTRY OF EDUCATION AND TRAINING The Theory of Probability and Statistics

NATIONAL ECONOMICS UNIVERSITY Mode of study: Full time. Intake: 62

Online and open book Exam
Exam date: 18/11/2021 Exam time:
Allowed time: 90 minutes

IHME Programs

Problem 1 (2p): Assuming the demand for a product A of a supermarket is a random

variable with average demand of 120 tons a day and standard deviation of 25 tons a
day.
a) If the supermarket order 150 tons a day, what is the probability of stock out?
b) If the manager of supermarket wants a probability of stock out to be 5%, what is
the order quantity a day?
c) How a manager manages the inventory by using the concepts of order quantity
and Probability of stock out?
Problem 2 (2p): The Daytona Beach Tourism Commission is interested in the average
amount of money a typical college student spends per day during spring break. They
survey 28 students and find that the mean spending is $60.57 with a standard deviation
of $15.32.
a) Develop a 95% confidence interval for the population mean daily spending.
b) Interpret the confidence level in the previous question.
c) How you can manage the margin of error by adjusting the sample size and
confidence level?
Problem 3 (1p): The manufacturer of a new product claims that his product will
increase output per machine by at least 29 units per hour. A line manager adopts the
product on 15 of his machines, and finds that the average increase was only 26 with a
standard deviation of 6.2. Is there evidence to doubt the manufacturer’s claim?
Conclude with 5% significance level.
Problem 4 (1.5p): As part of its quality control program, the Ford Motor Company,
began inspecting all supplier shipments of steel bars and recording the defect rate
according to quality criteria such as strength, dimensional characteristics, etc. When
Ford began this program, the defect rate in 100 shipments averaged 9%. A recent
report indicated an average defect rate of 2.2% in 136 shipments. The quality control
department wants to determine, at the 0.05 level of significance, if this represents a
significant improvement in the quality of the steel.
Problem 5 (1.5p): A manager is considering the purchase of new production equipment
to improve the output of the plant. Suppose the equipment from two suppliers is
extensively tested in multiple production runs. A total of 16 runs are recorded on
Supplier A’s equipment and another 12 runs are reported from Supplier B’s equipment.
The volume produced is recorded for each run. The results are summarized in the table
below.
Supplier A Supplier B
 Sample means 95.25 100.50
Sample standard deviation 13.45 10.55
Compare the mean volumes produced from two suppliers A and B using 5%
significance level. Assume equal variance of two populations.
Problem 6 (2p): A micro economist wants to determine how corporate sales are
influenced by capital and wage (all are in a million of dollars). She specifies the
following regression model:
Sales=β1 + β2Capital + β3Wages + u
She collects the data and produces the following regression output:
Regression Analysis
R² 0.724
Adjusted R² 0.692 n 26 a) Expl
R ain
Std. Error 17501.64 Dep. Var. Sales the

Regression output
Variables coefficients std. error t (df=28) p-value
6038.299
Intercept 15800 9 2.617 .0154
Capital 0.1245 0.2045 0.609 0.5485
Wages 7.0762 1.4729 4.804 0.0001
meaning of each coefficient and R .
2

b) Applying appropriate test, check for significance of each independent variable

(using 5% significant level).
c) Produce the confidence interval 95% for the β 2 and explain its meaning.
d) Using estimated regression model, what is the predicted sales (in millions of
dollars) for a company spending $110 million on capital and $120 million on wages?