EC404 - Monsoon 2016

Introduction to Statistics and Econometrics

Problem Set 1

Archana Aggarwal
307, SSS-II

1.
You are given the following information about the population in a small village.
There are 100 families in the village.
10 have no children;
40 have 1 child;
30 have 2 children;
10 have 3 children;
10 have 4 children.
(a) If you pick a family at random, what is the expected number of children in that family?
(b) If you pick a child at random (each child is equally likely), what is the expected number of children in
that child's family (including the picked child)?
2.
Consider a random variable X with p.d.f
event {X $ 1.5}.
(a) Calculate E[X], P(A), and E[X |A].
(b) Let Y = X2. Find E[Y] and Var(Y ).

fX(x) = 2x'3, if 1 < x # 2; 0 otherwise; and let A be the

3.
A signal s = 2 is transmitted from a satellite but is corrupted by noise, and the received signal is
X = s +W, where W is the noise. When the weather is good, which happens with probability 1'2, W is
normal with zero mean and variance 1. When the weather is bad, W is normal with zero mean and variance
four. In the absence of any weather information:
(a) What is the p.d.f of X?
(b) Calculate the probability that X is between 1 and 3.
4.
Let A and B be independent events with 0 < k[P(B)] = P(A) < 1, where k $1. Let
C = (A 1 Bc) c (Ac 1 B) be the event that exactly one of A and B occurred. Show that P(A|C) $k'(k + 1).
5.
Prove: If X is bounded, i.e., there exists a finite constant k < 4 such that P[*X* # k] = 1, then X has
moments of every order.
6.
In an experiment, the number of events happening in any unit time interval is a Poisson random
variable X with probability density function f(x)= (e!x)'(x!), x = 0, 1, 2, 3, ,
8>0.
Show that f(x + 1) = [f(x)]'(x+1), x = 0, 1, 2, 3, ..... Obtain the moment generating function of X and
hence show that E (X) = Var(X) = 8. Show also that E [(X !8)3] = 8.
7.
The p.d.f. of a random variable is: f(x)= ax 2e-kx, (k > 0, 0 # x < 4). Find
(i) the coefficient a,
(ii) the distribution function of the random variable X,
(iii) the probability that the random variable belongs to the interval (0,1'k).

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8.
Suppose X = X1 with probability p and X = X2 with probability (1 ! p), where p 0 (0, 1), X1 and X2
are two independent random variables with c.d.f.s F1(x) and F2(x) respectively. Find the c.d.f. of X.
9.
A researcher modelling the labor market assumes that every job has two characteristics: X the
duration of employment and W the wage rate.

(i) Find the probability density function of X given W = w.

(ii) Find the expected value of X given W = w.
(iii) Find the regression of W on X.
10.
Suppose X1, X2 and X3 are independent random variables with X1 1 N(1,6), X2 1 N(11,2) and
X3 1 N(2,3). If Z = X1 +3 X2 + 2X3. Find:
(a) The distribution of Z.
(b) P(Z>0).
Note: You may use the properties of the Normal distribution in answering this question.
11.

A sequence of random variables {Y1, Y2, Y3,....} converges to zero in mean square if

Suppose E

and converges to zero in probability if

n = 1,2,....... . Using Chebychev's inequality, show that convergence in mean square implies convergence
in probability.
12.
Let X be the weight of soap in a 6 kg. box. Assume that the distribution of X is N(6.05, 0.0004).
(a) Find P(X<6.0171).
(b) Nine boxes are selected at random from the production line. Find the probability that at most two boxes
weigh less than 6.0171 kg. each.
(c) Let
13.

be the sample mean of the 9 boxes. Find P(

# 6.035)

Let X1,......X18 be a random sample of size 18 from a 2 distribution with one degree of freedom.

(a) What is the distribution of Y =

(b) What are the mean and variance of Y?
(c) Using the answer to (a) and the appropriate tables we have P(Y # 9.39) = 0.05 and P(Y # 34.8) = 0.99.
Compare these with approximations found using the Central Limit Theorem.
14.
Let X and Y be jointly distributed random variables with finite moments: E[X]=x, E[Y]=y,
V[X]= x2, E[Y2]= y2, Cov[X,Y]= xy.
(a) Show that X!x and Y!y!xy(X!x)'x2 have a covariance equal to zero.
(b) Show that y + xy(X- x)'x2 is the linear function of X that minimizes E[Y!( + X)]2.
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15.
A factory produces CDs. The number of items produced during a week is a random variable with
mean 50 and variance 25. What is the probability that the production in any given week will exceed 75?
16.

Let X1,...., X48, be a random sample from the distribution with pdf,

Approximate the probability that at most ten of these random variables have values > four.
17.

The management of a cinema fills Y percent of the seats for any given show, where Y is distributed

with p.d.f.:
, 0<y<1. The theater can seat up to 400 persons. Cost of screening a film
fixed at Rs. 10,000. = ticket price/50. Find:
(a) the probability that in a show at most 200 seats are filled, given that the a ticket is priced at Rs.150.
(b) the expected profit from a show, given a ticket price of Rs.150.
(c) If ticket price is lowered to Rs.100 what will be the new level of expected profit.
18.
A learned bibliophile falls upon hard times and has to sell a rare, original Dumas manuscript. In
order to maximize his earnings he decides to invite sealed bids, with the document going to the highest
bidder. The well known collector Steve Gutenberg is among the n bidders. Gutenberg being an influential
man has ensured that his bid will be opened first. This means that as long as no one else makes a higher bid
he will get the manuscript. Gutenberg also knows that the bids of each other buyer are distributed with a

(,1) distribution, i.e., with p.d.f. given by

, 0 < y < 1. If Gutenberg succeeds in buying th
book at price y, he will make a profit of (1-y). What should his bid be to maximize his expected profit?
What is the probability that he will win the auction?
19.
Suppose that two random variables X and Y satisfy the following condition: E[Y|X]= a + bx for all
x. In other words, the conditional expectation of Y given X is a linear function of X. (Not all random
variables will satisfy this condition.) Solve for b in terms of var(X), var(Y) and cov(X,Y).
20.

Let X1, X2, ......, be i.i.d. random variables with (unknown but finite) mean and variance 2 where

2 > 0. For i = 1, 2, ......., let

(a) Are the random variables Yi independent?

(c) Let

(b) Are they identically distributed?

Is Mn convergent in probability to ? Prove your answer.

Exercises 21,22, & 23 are different forms of the same problem. All deal with the fact that the c.d.f. of any
continuous random variable (which is itself a random variable) has a U(0,1) distribution.
21.

Find the probability density of the random variable X, where the c.d.f. of X has the form:

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22.

Let X be a continuous random variable with c.d.f., F(.); consider the random variable

This transformation is called the probability integral transformation. Sho

distribution of Y is uniform on the interval (0,1), i.e., FY(y) = y, 0 < y < 1.
23.

The p.d.f. of X is:

, -1 # x # 1. Find the distribution function of X and show that

has a uniform distribution on the interval (0,1). (Show that Y = (x 3 + 1)'2 has a uniform distribution on
the interval (0,1).)
24.
Let X and Y be continuous random variables having joint distribution function F and joint density
function f. Find the joint density function of W = X 2 and Z = Y 2. Show that if X and Y are independent then
W and Z are independent.
25.
AMD is designing a new high-speed computer chip, but the manufacturing process is very
challenging. Engineers estimate that there is a 10% chance that the chip will be bad because of dust
contamination. Furthermore, they estimate a 35% chance that there is a problem with the lithography
process. Either way, they have to throw the chip out. Failures are possible because of either problem, but
they are not independent. In fact, they estimate that 8% of chips have both problems.
(a) What is the overall probability that a chip will be successfully created?
(b) A clever engineer finds a way to improve the success rate to (he thinks) 75% and they decide to produce
a pilot batch of 500 chips using his method. Consequently, he thinks that X, the number of working chips
that they will create, is a Binomial random variable. What are the mean and standard deviation of X
according to his model?
Let NX denote the normal that best approximates the distribution of X.
(c) Using the normal approximation to the engineers model, calculate the probability that they produce at
least 365 working chips.
26.
Wages for workers in a particular industry average Rs. 11.90 per hour and the standard deviation is
Rs. 0.40. If the wages are assumed to be normally distributed:
a) What percentage of workers receive wages between Rs. 10.80 and Rs. 12.40?
b) What percentage of workers receive less than Rs. 11.00?
c) What percentage of workers receive more than Rs. 12.95?
d) 10 percent of all workers earn more than what wage?
e) 25 percent of all workers earn less than what wage?
f) Determine the inter-quartile wage range (25-75 percentile) for workers in this industry?

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