2023-10-06 Test1S B11

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Feb 20, 2024

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Page 1 of 9 MGEB11H3 Quantitative Methods in Economics I Test 1 15:00 17:00 Friday October 6, 2023 Victor Yu Last Name (Print) ___Solution___ _ First/Other Names Student Number Time allowed: Two (2) hours Aids allowed: Any Calculator A formula sheet is attached with the test. This test consists of 21 questions in 11 pages including this cover page. It is the student’s responsibility to hand in all pages of this test. Any missing page will get zero mark. Show your work in each question in Part 2. This test is worth 25% of your course grade. The University of Toronto's Code of Behaviour on Academic Matters applies to all University of Toronto Scarborough students. The Code prohibits all forms of academic dishonesty including, but not limited to, cheating, plagiarism, and the use of unauthorized aids. Students violating the Code may be subject to penalties up to and including suspension or expulsion from the University.
Page 2 of 9 Test 1 on October 6, 2023 MGEB11 Fall 2023 Student Last Name (Please print): Student First Name (Please print): Student ID: Student Signature: Part 1. Multiple Choice answers . Circle the BEST answer . Only this page is marked for Multiple Choice. Answers in other pages are NOT marked. 1. (a) (b) (c) (d) (e) DO NOT WRITE INSIDE THIS BOX 2. (a) (b) (c) (d) (e) Page Max Mark 3. (a) (b) (c) (d) (e) Part 1 3 5 51 4. (a) (b) (c) (d) (e) Q18 6 13 5. (a) (b) (c) (d) (e) Q19ab 7 7 6. (a) (b) (c) (d) (e) Q19c 8 4 7. (a) (b) (c) (d) (e) Q20a 9 5 Q20b 10 7 8. (a) (b) (c) (d) (e) Q21a 11 5 9. (a) (b) (c) (d) (e) Q21b 12 8 10. (a) (b) (c) (d) (e) Total 100 11. (a) (b) (c) (d) (e) 12. (a) (b) (c) (d) (e) 13. (a) (b) (c) (d) (e) 14. (a) (b) (c) (d) (e) 15. (a) (b) (c) (d) (e) 16. (a) (b) (c) (d) (e) 17. (a) (b) (c) (d) (e)
Page 3 of 9 Important note: Put your answers of the multiple choice questions in Page 2 of this test paper. Only Page 2 is marked for multiple choice questions. Part 1. Multiple Choice. Select one answer per question. Total: 17 questions = 51 points. 1. A random sample of 5 students has the following test scores 50, 60, 60, 65, 70. The 50 th percentile is closest to (a) 50 (b) 60 (c) 65 (d) 68 (e) 70 2. A random sample of 5 students has the following test scores 50, 60, 60, 65, 70. The standard deviation is closest to (a) 7.42 (b) 9.45 (c) 12.33 (d) 15.36 (e) 20.12 3. A group of 50 students consists of 30 girls and 20 boys. The median test score for the girls is 80 and the median test score for the boys is 70. Which one of the following statements is most correct on the median of these 50 students? (a) Nothing can be known about the value of the median since the 50 test scores are not given. (b) Median = (80 + 70)/2 = 75 (c) Median = (30 × 80 + 20 × 70)/50 = 76 (d) Median = 150 (e) 70 Median 80 4. A sample of 100 students has the following test scores: 50, 60, …, 70. Given that the following calculations: 50 + 60 + ⋯ + 70 = 600 and 50 2 + 60 2 + ⋯ + 70 2 = 25875 . The sample standard deviation is closest to (a) 5 (b) 10 (c) 12.5 (d) 15 (e) 20 5. A simple regression model is assumed for relating the price of grapefruit X (in dollars) to quantities of grapefruit demanded Y . Data for five months is provided below and some calculations are given. X Y ? − ? ̅ (? − ? ̅ ) 2 ? − ? ̅ (? − ? ̅ ) 2 (? − ? ̅ )(? − ? ̅ ) 0.1 50 0.2 0.04 22 484 4.4 0.2 30 0.1 0.01 2 4 0.2 0.3 30 0 0 2 4 0 0.4 20 0.1 0.01 8 64 0.8 0.5 10 0.2 0.04 18 324 3.6 Total 1.5 140 0 0.10 0 880 9.0 Mean 0.3 28 0 0.02 0 176 1.8 The correlation coefficient between X and Y is closest to (a) 0.96 (b) 0.92 (c) 0.88 (d) 0.84 (e) 0.80 6. Let A and B be two events, 6 . 0 ) | ( = B A P , P (at least one of the two events occurs) = 0.8, and P (exactly one of the two events occurs) = 0.6 where “exactly one” means either A or B , but not both A and B . Then P ( A ) is equal to (a) 2 1 (b) 3 1 (c) 4 3 (d) 3 2 (e) none of these
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Page 4 of 9 7. Let A and B be two events, 2 . 0 ) ( = A P , 4 . 0 ) ( = B P , and ( ) ( ) 75 . 0 | | = + A B P B A P . Then ( ) B A P is equal to (a) 0.08 (b) 0.1 (c) 0.2 (d) 0.6 (e) none of these 8. Let A and B be two events with probabilities P ( A )=0.3 and P ( B ) =0.4. Which one of the following statements is always true? [Hint: Select one best answer ] (a) 𝑃(? ∪ ?) = 0.58 if A and B are independent. (b) 𝑃(? ∪ ?) = 0.7 if A and B are mutually exclusive. (c) Both (a) and (b) are always true. (d) Only (a) is always true, (b) is not always true. (e) Only (b) is always true, (a) is not always true. 9. Let A and B be two events such that P ( A ) = 0.4, P ( B )=0.3 and 6 . 0 ) ( = B A P . The value of ) | ( A B P is closest to (a) 0.1 (b) 0.25 (c) 1 3 (d) 0.5 (e) 0.75 10. Let A and B be two events, 𝑃(?) = 1 4 , 𝑃(?|?) = 1 2 and 𝑃(?|?) = 1 3 . Then 𝑃(? ∪ ?) is equal to (a) 1 8 (b) 1 4 (c) 1 3 (d) 1 2 (e) none of these 11. Albert flips 3 fair coins and Betty flips 2 fair coins. Albert wins if the number of heads he gets is more than the number of heads Betty gets. What is the probability that Albert wins? (a) 1 3 (b) 1 2 (c) 2 3 (d) 3 5 (e) none of these Questions 12 15. In year 2023, the mean wage of 1,000 factory workers is $40,000 with a standard deviation of $3,000. 12. The number of factory workers having wages between $34,000 and $46,000 can be best described as (a) Approximately 500 (b) Approximately 750 (c) at least 750 (d) Approximately 815 (e) at least 815 13. If wages follow a bell-shape distribution, the number of factory workers having wages between $37,000 and $46,000 can be best described as (a) Approximately 500 (b) Approximately 750 (c) at least 750 (d) Approximately 815 (e) at least 815 14. In year 2024, every factory worker receives a wage increase. The wage in year 2024 is composed of a 3% increase from the year 2023 plus a flat $500 bonus. The mean wage in year 2024 is (a) $41,200 (b) $41,700 (c) $42,000 (d) $42,500 (e) none of these 15. The standard deviation on the wages in year 2024 is closest to (a) 90 (b) 1500 (c) 2500 (d) 3000 (e) 3090
Page 5 of 9 Questions 16 17 . Some economists have proposed mandatory wage and price controls to combat inflation, but others claim such controls are ineffective because they deal with the effects, not the causes of inflation. Suppose a recent national pool indicated that 40% of all Canadian adults favour wage and price controls. A sample of 4 adults is selected at random. 16. The probability that none of them in the sample are favour controls is closest to (a) 0.0256 (b) 0.0864 (c) 0.1024 (d) 0.1296 (e) 0.5184 17. The probability that one of them in the sample favours controls is closest to (a) 0.0256 (b) 0.0864 (c) 0.2160 (d) 0.3456 (e) 0.5184
Page 6 of 9 Part II Show your work in each question. 18. (13 points) In a certain factory, machine A produces 35% of the CD’s, machine B produces 25% of the CD’s, and machine C produces 40%. Past results show that machine A is twice as likely to produce defective CD’s as machine B; machines C is three times as likely to produce defective CD’s as machine B. A randomly selected CD this factory is defective, what is the probability that it is produced by machine A? Solution: Method 1. Let A = event that a CD is produced by machine A B = event that a CD is produced by machine B C = event that a CD is produced by machine C D = a CD is defective c D = the complement of D . p = P (machine B produces defective CDs) = ( ) B D P p A D P 2 ) ( = p p A D P 7 . 0 2 ) 35 . 0 ( ) ( = = P ( A )=0.35 p A D P c 2 1 ) | ( = ) 2 1 ( 35 . 0 ) ( p A D P c = p B D P = ) | ( p B D P 25 . 0 ) ( = 25 . 0 ) ( = B P p B D P c = 1 ) | ( ) 1 ( 25 . 0 ) ( p B D P c = p C D P 3 ) | ( = p p C D P 2 . 1 3 ) 4 . 0 ( ) ( = = P ( C )=0.40 p C D P c 3 1 ) | ( = ) 3 1 ( 4 . 0 ) ( p C D P c = ) ( ) | ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( C P C D P B P B D P A P A D P C D P B D P A D P D P + + = + + = = 0.7 p + 0.25 p + 1.2 p = 2.15 p ( ) ( ) ( ) 325581395 . 0 43 14 215 70 15 . 2 7 . 0 | = = = = = p p D P D A P D A P Method 2. Supplier D c D Total A 0.7 p 0.35 0.7 p 0.35 B 0.25 p 0.25 0.25 p 0.25 C 1.2 p 0.4 1.2 p 0.40 Total 2.15 p 1 2.15 p 1.00 Since p B D P = ) ( ,we have p B P B D P B D P 25 . 0 ) ( ) | ( ) ( = = . Similarly we can calculate other joint probabilities in the above table. Hence ( ) ( ) ( ) 325581395 . 0 43 14 215 70 15 . 2 7 . 0 | = = = = = p p D P D A P D A P
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Page 7 of 9 19. (11 marks) The probabilities that three drivers will be able to drive home safely after drinking are 0.5, 0.25 and 0.2, respectively. The drivers are set out to drive home after drinking. Assume the events of driving home safely after drinking are independent for the three drivers. (a) (3 points) What is the probability that none of them arrive home safely? Solution: (0.5)(0.75)(0.8)=0.3 (b) (4 points) What is the probability that more than one of them arrives home safely? Solution: P (more than one arrives home safely) = P (2 or 3 drivers arrive home safely) = (0.5)(0.25)(0.8)+(0.5)(0.75)(0.2)+(0.5)(0.25)(0.2)+(0.5)(0.25)(0.2)=0.225 (c) (4 points) What is the probability that at most two of them arrive home safely? Solution: Let P ( A )=0.5, P ( B )=0.25, P ( C )=0.2. P (at most 2 arrive home safely) = P (0, 1, or 2 arrive home safely) = (0.5)(0.75)(0.8)+(0.5)(0.75)(0.8)+(0.5)(0.25)(0.8)+(0.5)(0.75)(0.2) +(.5)(.25)(.8)+(.5)(.75)(.2)+(.5)(.25)(.2) =.3+.3+.1+.075+.1+.075+.025 = 0.975 Alternative solution: 1 P (3 arrive safely) = 1 (0.5)((0.25)(0.2)=0.975
Page 8 of 9 20. (12 points) Suppose you invested in a risky venture. The income ( X ) that will be earned from this venture during a year has the following probability distribution and the income earned is independent from year to year. X $500 $1000 $2000 P ( X ) 0.5 0.3 0.2 (a) (5 points) In the next five years, what is the probability that your income from this venture is $1000 or $2000 per year for more than 1 year? Solution: p = probability that your income from this venture is $1000 or $2000 per year is = P ( X =1000) + P ( X =2000) = 0.3 + 0.2 = 0.5 In the next five years, the probability that the your income from this venture is $1000 or $2000 per year for more than 1 year is 1 P (0 or 1 year with income $1000 or $2000 per year) = ( ) ( ) 8125 . 0 5 . 0 5 5 . 0 1 5 5 = (b) (7 points) Suppose you and your friend invested in this venture. Assume you and your friend’s incomes from the venture are independent. In a given year, what is the probability that your income is higher than your friend’s income? Solution: Let Y be your income and F be your friend’s income from this venture. Your income is higher than your friend’s income when the following events occur: Y =1000 and F =500; or Y =2000 and F =1000; or Y =2000 and F =500. P (Your income is higher than your friend’s income) = P ( Y =1000 and F =500; or Y =2000 and F =1000; or Y =2000 and F =500) = P ( Y =1000 and F =500)+ P ( Y =2000 and F =1000)+ P ( Y =2000 and F =500) = P ( Y =1000) P ( F =500)+ P ( Y =2000) P ( F =1000)+ P ( Y =2000) P ( F =500) = (0.3)(0.5)+(0.2)(0.3)+(0.2)(0.5) = 0.31
Page 9 of 9 21. (13 points) Suppose a coin is biased. The probability of showing a head is 1 3 , and the probability of showing a tail is 2 3 . This coin is rolled until a head shows. Assume that the outcomes of the rolls are independent. (a) (5 points) What is the probability that it will takes more than 2 rolls for that to happen? Solution: Let E be the event that it takes more than 2 rolls for the first head to appear. Method 1. P ( E ) = 1 P (it takes 1 or 2 rolls for the first head to appear) = 3 1 3 2 3 1 1 = 9 4 Method 2. ( ) ( ) ,... , , TTTTH TTTH TTH P E P = = ( ) ( ) ( ) ... + + + TTTTH P TTTH P TTH P = ... 3 1 3 2 3 1 3 2 3 1 3 2 4 3 2 + + + = + + + + ... 3 2 3 2 3 2 1 3 1 3 2 3 2 2 = 3 2 1 1 3 1 3 2 2 = ( ) 9 4 3 3 1 9 4 = where we have used the geometric series r r r r = + + + + 1 1 ... 1 3 2 , 1 0 r . (b) (8 points) Suppose it takes more than 2 rolls to get the first head, what is the probability that the first head appearing on an odd-numbered roll? Solution: Let E be the event that it takes more than 2 rolls for the first head to appear. From part (A), ( ) 9 4 = E P . Let O = the event that the first head appears on an odd-numbered roll. ( ) ( ) ( ) 9 / 4 ,... , , | TTTTTTH TTTTH TTH P E P E O P E O P = = = + + + ... 3 1 3 2 3 1 3 2 3 1 3 2 4 9 6 4 2 = + + + ... 3 2 3 2 1 3 1 3 2 4 9 4 2 2 = 2 2 3 2 1 1 3 1 3 2 4 9 = 5 3
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