Eco 580 Midterm Exam 1

Multiple Choice Questions (2*8=16 points)

1. Two events are considered to be mutually exclusive if the events are independent.
a. True
b. False
2. Assuming that the change in daily closing prices for stocks on the New York
Stock Exchange is a random variable that is normally distributed with a mean of
$0.35 and a standard deviation of $0.33. Based on this information, what is the
probability that the price of a randomly selected stock will be lower by $0.40 or
more?
a. 2.27
b. 0.4884.
c. 0.0116
d. 0.9884
3. The number of customers who enter a bank is thought to be Poisson distributed
with a mean equal to 10 per hour. What is the chance that 2 or 3 customers will
arrive in a 15-minute period?
a. 0.0099
b. 0.4703
c. 0.0427
d. 0.0053
4. A question appears on a job application for sales persons at a national insurance
company. It asks the applicants to rate their gregariousness on a scale from 1 to
10. The answers obtained from 8 such applications appear here:
8, 6, 9, 9, 7, 10, 7, 5
Are the data
a. Symmetric
b. Right skewed
c. Left skewed
5. The following probability distribution was subjectively assessed for the number of
sales a salesperson would make if they made five sales calls in one day.
Sales Probability
0 0.10
1 0.15
2 0.20
3 0.30
4 0.20
5 0.05
When the salesperson makes a sale, there are three possible sales levels: large,
medium, and small. The probability of a large sale is 0.20 and the chance of a
medium sale is 0.60. If a salesperson makes two sales, the probability that at least
one is large is 0.36.
a. True
 b. False
6. The Anderson Lumber Company has three sawmills which produce boards of
different lengths. The following table is based on a random sample of 1,000
boards selected from the lumber inventory
Board Length
Sawmill 8 ft 10 ft 12 ft 14 ft
A 140 100 80 14
B 250 20 100 50
C 160 50 16 20

Based on these data, if a board is selected that is 12 feet long, the probability that
is was made at sawmill A is
a. 0.08
b. Slightly greater than 0.40
c. Slightly greater than 0.34
d. None of the above
7. A package delivery service claims that no more than 5 percent of all packages
arrive at the address late. If a sample of size 10 packages is randomly selected,
and the 5 percent rate holds, what is the probability that more than 2 packages will
be delivered late?
a. 0.012
b. 0.001
c. 0.086
d. None of the above
8. When a customer comes to a bank, there are three primary locations they may
select to go to: teller, loan officer, or escrow department. Based on past
experience, the following probability distribution applies:
Location Probability
Teller 0.60
Loan Officer 0.30
Escrow 0.10
Seventy percent of customers are males. The probability that the next customer
will be male and will go to either the teller or the escrow department is 0.49.
a. True
b. False
Short Answer Questions (9 points)

1. (4 points) Harrison Water Sports has three retail outlets: Seattle, Portland, and
Phoenix. The Seattle store does 50 percent of the total sales in a year, while the
Portland store does 35 percent of the total sales. Further analysis indicates that of
the sales in Seattle, 20 percent are in boat accessories. The percentage of boat
accessories at the Portland store is 30 and the percentage is 25 at the Phoenix
store. If a sales dollar is recorded as a boat accessory, what is the probability that
the sale was made at the Portland store?
2. (5 points) The Nu-Look Car Wash recently opened at a new location. The
manager at this location is concerned about staffing levels, so he has taken a
sample of 100 days from the company’s other location and has found the
following frequency distribution

Cars Frequency
0 and under 10 10
10 and under 20 17
20 and under 30 35
30 and under 40 22
40 and under 50 16

(Hint: use the midpoints of each class to develop a probability distribution for the
number of cars arriving at the car wash, and use the distribution for the following
calculation.)
a. (2 points)What is the expected number of cars arriving at the car wash?
b. (3 points)Two employees wash each car. It takes approximately 20
minutes to wash each car. Determine the number of employees the
manager must have on hand each day to meet demand at least 85% of the
days. (Assume 8 working hours per day.)