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Assignment #2: Estimation

Due on ?, 2017

Course Title: Probability & Business Statistics II

Exercises 7.1, 7.3, 7.7, 7.69 of Newbold (2015)

LEARNING OUTCOMES

After completing the second part of this chapter, students will be able
to:

(LO 1) explain the desired properties of estimators


(LO 2) explain the difference between point estimates and confidence
intervals for estimating a population parameter
(LO 3) construct and interpret confidence interval estimates for the mean
(variance known and unknown)
(LO 4) describe the characteristics of Students t distribution.
(LO 5) use the Students t distribution to solve business problems.
(LO 6) construct and interpret confidence interval estimates for population
proportion (large samples)
(LO 7) construct confidence interval estimates for the variance of a normal
distribution
(LO 8) determine the required sample size to obtain a desired margin of
error for large populations

Conceptual Questions

1. Explain why the critical value for a given confidence level when the population variance is not
known is always greater than the critical value for the same confidence level when the
population variance is known.
2. When we need to estimate the population mean, and the population standard deviation is
unknown, we are hit with a double whammy when it comes to the margin of error. Explain
what the double whammy is and why it occurs. (Hint: Consider the sources of variation in
the margin of error.)
3. An insurance company in Iowa recently conducted a survey of its automobile policy
customers to estimate the mean miles these customers commute to work each day. The result
based on a random sample of 300 policyholders indicated the population mean was between
3.5 and 6.7 miles. This interval estimate was constructed using 95% confidence.

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After receiving this result, one of the managers was overheard telling a colleague that 95% of
all customers commute between 3.5 and 6.7 miles to work each day. How would you respond
to this statement? Is it correct? Why or why not? Discuss.
4. Examine the equation for the margin of error when estimating a population mean


e z / 2
n

Indicate the effect on the margin of error resulting from an increase in each of the following
items:
a. confidence level
b. z-value
c. standard deviation
d. sample size
e. standard error
5. What are the advantages of using interval estimation rather than point estimation?
6. Draw a sampling distribution of an unbiased estimator.
7. Draw a sampling distribution of a biased estimator.
8. Draw a diagram that shows the sampling distribution representing two unbiased estimators,
one of which is relatively efficient.
9. The following statement was made by an expert in statistics. If a sample of size 9 is chosen
from a normal distribution having mean , then we can be 95 percent certain that will lie

X 1.96.s / n X
within where is the sample mean and s is the sample standard deviation.
Is this statement correct? Justify your answer.
10. What is the difference between the student and standard normal distribution.
11. Consider the t-distribution with 10 degrees of freedom, find a so that P (t < a) = 0.95.
12. Consider the t-distribution with 15 degrees of freedom, find b so that P (t > b) = 0.025.
13. Consider the t-distribution with 10 degrees of freedom, use the t table to approximate P(t > 3).
14.A confidence interval was used to estimate the proportion of statistics
students who are female. A random sample of 72 statistics students
generated the following confidence interval: (.438, .642). Using the
information above, what sample size would be necessary if we wanted to
estimate the true proportion to within 3% using 99% reliability?
MCQs

1. Which statement is not true about confidence intervals?


(a) A confidence interval is an interval of values computed from
sample data that is likely to include the true population value.
(b) An approximate formula for a 95% confidence interval is sample
estimate margin of error.
(c) A confidence interval between 20% and 40% means that the
population proportion lies between 20% and 40%.

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(d) A 99% confidence interval procedure has a higher probability of
producing intervals that will include the population parameter than a
95% confidence interval procedure.
2. Which statement is not true about the 95% confidence level?
(a) Confidence intervals computed by using the same procedure will
include the true population value for 95% of all possible random
samples taken from the population.
(b) The procedure that is used to determine the confidence interval
will provide an interval that includes the population parameter with
probability of 0.95.
(c) The probability that the true value of the population parameter
falls between the bounds of an already computed confidence
interval is roughly 95%.
(d) If we consider all possible randomly selected samples of the
same size from a population, the 95% is the percentage of those
samples for which the confidence interval includes the population
parameter.
3. A 90% confidence interval for the mean percentage of airline reservations
being canceled on the day of the flight is (1.1%, 3.2%). What is the point
estimator of the mean percentage of reservations that are canceled on the
day of the flight?
(a)1.05%
(b) 2.15%
(c) 2.1%
(d) 1.60%
4. The real estate industry claims that it is the best and most effective
system to market residential real estate. A survey of randomly selected
home sellers in Illinois found that a 95% confidence interval for the
proportion of homes that are sold by a real estate agent is 69% to 81%.
Interpret the interval in this context.
(a) In 95% of the years, between 69% and 81% of homes in Illinois
are sold by a real estate agent.
(b) 95% of all random samples of home sellers in Illinois will show
that between 69% and 81% of homes are sold by a real estate
agent.
(c) If you sell a home in Illinois, you have an 75% 6% chance of
using a real estate agent.
(d) We are 95% confident that between 69% and 81% of homes in
this survey are sold by a real estate agent.
(e) We are 95% confident, based on this sample, that between 69%
and 81% of all homes in Illinois are sold by a real estate agent.

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5. The real estate industry claims that it is the best and most effective
system to market residential real estate. A survey of randomly selected
home sellers in Illinois found that a 99% confidence interval for the
proportion of homes that are sold by a real estate agent is 70% to 80%.
Explain what "99% confidence" means in this context.
(a) In 99% of the years, between 70% and 80% of homes in Illinois
are sold by a real estate agent.
(b) About 99% of all random samples of home sellers in Illinois will
produce a confidence interval that contains the true proportion of
homes sold by a real estate agent.
(c) There is a 99% chance that the true proportion of home sellers in
Illinois who sell their home with a real estate agent is between 70%
and 80%.
(d) 99% of home sellers in Illinois will sell their home with a real
estate agent between 70% and 80% of the time.
(e) About 99% of all random samples of home sellers in Illinois will
find that between 70% and 80% of homes are sold by a real estate
agent.
6. Sales of a new line of athletic footwear are crucial to the success of a
company. The company wishes to estimate the average weekly sales of the
new footwear to within $300 with 90% reliability. The initial sales indicate
that the standard deviation of the weekly sales figures is approximately
$1100. How many weeks of data must be sampled for the company to get
the information it desires?
(a) 7 weeks
(b) 37 weeks
(c) 23 weeks
(d) 10,915 weeks
7. An educator wanted to look at the study habits of university students. As
part of the research, data was collected for three variables - the amount of
time (in hours per week) spent studying, the amount of time (in hours per
week) spent playing video games and the GPA - for a sample of 20 male
university students. As part of the research, a 95% confidence interval for
the average GPA of all male university students was calculated to be:
(2.95, 3.10). Which of the following statements is true?
(a) In construction of the confidence interval, a t-value with 20
degrees of freedom was used.
(b) In construction of the confidence interval, a z-value was used.
(c) In construction of the confidence interval, a t-value with 19
degrees of freedom was used.

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(d) In construction of the confidence interval, a z-value with 20
degrees of freedom was used.
8. Find the value of t0 such that the following statement is true: P(-t 0 t t0)
= .95 where the number of degrees of freedom df is equal to 15
(a) 2.602
(b) 2.947
(c) 2.131
(d) 1.753
9. A confidence interval was used to estimate the proportion of statistics
students who are female. A random sample of 72 statistics students
generated the following confidence interval: (.438, .642). Using the
information above, what sample size would be necessary if we wanted to
estimate the true proportion to within 3% using 99% reliability?
(a) 1916
(b) 1831
(c) 1769
(d) 1842
10.What is the confidence level of the following confidence interval for ?

x 2.33 / n

(a) 233%
(b) 67%
(c) 98%
(d) 78%
Exercise #1

The personnel director of a large corporation wishes to study absenteeism among


clerical workers at the corporations central office during the year. A random
sample of 25 clerical workers reveals the following:

X 9.7 s 4.0
Absenteeism: days, days.
12 clerical workers were absent more than 10 days.

1. Define the population, variable of interest and the parameters.

2. Construct a 95% confidence interval estimate for the mean number of


absences for clerical workers during the year. Interpret. (Hint: Assume that
the population is normally distributed)

3. Construct a 95% confidence interval estimate for the population proportion


of clerical workers absent more than 10 days during the year. Interpret.
4. Suppose that the personnel director also wishes to take a survey in a
branch office. What sample size is needed to have 95% confidence in
estimating the population mean absenteeism to within 1.5 days if the

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population standard deviation is estimated to be 4.5 days? ((Hint: Assume
that the population is normally distributed)

Exercise #2

According to Gallups poll on consumer behavior, 36% of Americans say they will
consider only cars manufactured by an American company when purchasing a
new car. (Data extracted from The Gallup Poll, www.gallup.com, March 31, 2010.)
If you select a random sample of 200 Americans,

1. What are the population, the variable of interest and the parameter(s)?
2. What is the sample statistic(s)?
3. What is the distribution of the sample statistic defined in question 2. (Hint.
Check the conditions to obtain its distribution)
4. What is the probability that the sample will have between 30% and 40%
who say they will consider only cars manufactured by an American
company when purchasing a new car?

Exercise #3

The Human Relations Department of Electronics, Inc., would like to include a


dental plan as part of the benefits package. The question is: How much does a
typical employee and his or her family spend per year on dental expenses? A
sample of 45 employees reveals the mean amount spent last year was $1,820,
with a standard deviation of $660.

1. What are the population, the variable of interest and the parameter(s)?
2. Construct a 95 percent confidence interval for the population mean.
3. The information from part (2) was given to the president of Electronics, Inc.
He indicated he could afford $1,700 of dental expenses per employee. Is it
possible that the population mean could be $1,700? Justify your answer.

Exercise #4

A market researcher for a consumer electronics company wants to study the television viewing habits
of residents of a particular area. A random sample of 40 respondents is selected, and each respondent
is instructed to keep a detailed record of all television viewing in a particular week. The results are as
follows:

X 15.3 s 3.8
Viewing time per week: hours, hours.
27 respondents watch the evening news on at least three week nights.

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1. Construct a 95% confidence interval estimate for the mean amount of television watched per
week in this area.
2. Construct a 95% confidence interval estimate for the population proportion who watch the
evening news on at least three weeknights per week.

Suppose that the market researcher wants to take another survey in a different location. Answer this
question:

3. What sample size is required to be 95% confident of estimating the population mean viewing
time to within hours assuming that the population standard deviation is equal to five hours?

Exercise #5

The sponsors of television shows targeted at the childrens market wanted to


know the amount of time children spend watching television because the types
and number of programs and commercials are greatly influenced by this
information. As a result, it was decided to survey 100 North American children
and ask them to keep track of the number of hours of television they watch each
week. The results of the survey are
Descriptive Statistics: Time

Variable N N* Mean StDev Minimum Maximum


Time 100 0 27,191 8,373 9,500 50,300

1. What are the population, the variable of interest and the objective of the
survey?
The television sponsors want an estimate of the amount of television watched by
the average North American child. A confidence level of 95% is judged to be
appropriate.
2. What are the population parameter(s) and sample statistic(s) considered to
reach the objective of the survey.
3. What is the distribution of the random variable that will be used to
construct the confidence interval in question 4. (Hint. State the
condition(s) to obtain its distribution)
4. Construct a 95% confidence interval estimate of the parameter defined in
question 2.
5. Interpret the confidence interval estimate obtained in question 4.
6. Use the following histogram to check the assumption stated in question 3.

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7. Some people erroneously interpret the confidence interval estimate to

IC1 ( ) a, b 1
mean, , that there is probability that the population
mean lies between a and b. Explain.

Exercise #6

A company that produces universal remote controls wanted to determine the


number of remote control devices American homes contain. It is assumed that
this number is normally distributed. The company hired a statistician to survey
240 randomly selected homes and determine the number of remote controls. The
results are reported in Table 3.

1. Define the population, variable of interest and the parameters.


2. Estimate with 95% confidence the average number of remote controls in
the United States.
3. If there are 100 million households, estimate with 95% confidence the total
number of remote controls in the United States.

Table 3. Descriptive Statistics

N Minimum Maximum Mean Std. Deviation

Remotes 240 0 9 4,66 2,368


Valid N (listwise) 240

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