Tyler Clark - Homework 5 ECON

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Tyler Clark – Homework 5 ECON a. Motel; $20,000 b. Theater; $5000 c. Motel/Restaurant; $14,000 d. Theater; $5,400 e. Motel; $9,000

a. Widget = (0.2*120,000)+(0.7*70,000)+(0.1*-30000) 24,000 + 49,000 – 3,000 = $70,000 Hummer = (0.2*60,000)+(0.7*40,000)+(0.1*20,000) 12,000 + 28,000 + 2,000 = $42,000 Nimnot = (0.2*35,000)+(0.7*30,000)+0.1(30,000) 7,000 + 21,000 + 3,000 = $31,000 Widget is the best decision at $70,000. b. Widget = (120,000 – 120,000) + (70,000 – 70,000) + (30,000 – (-30,000)) (0*0.2) + (0*0.7) + (60,000*0.1) = $6,000 Hummer = (120,000 – 60,000) + (70,000 – 40,000) + (30,000 – 20,000) (60,000*0.2=12,000) + (30,000*0.7=21,000) + (10,000*0.1=1,000) = $34,000 Nimnot = (120,000 – 35,000) + (70,000 – 30,000) + (-30,000 – 30,000) (85,000*0.2=17,000) + (40,000*0.7=28,000) + (-60,000*0.1=-6,000) = $39,000 Lowest value between 6,000, 34,000, and 39,000 = $6,000. Widget is the best choice. c. (120,000*0.2=24,000)+(70,000*0.7=49,000)+(30,000*0.1=3,000)= $76,000

Highest EMV of the three decisions = 120,000 120,000 – 76,000 = $44,000 a. (Standard deviation/√sample) = (3/√50) = 0.4243 (Sample mean – Hypothesis)/(Answer^^) = (14.15-15)/0.4243 = -2 b. P value of -2 on z table: 0.0228 c. Reject hypothesis because 0.0228 < 0.05 d. (a = .05) = (z = + 1.96) Rule: Reject hypothesis if Z < -1.96 or > 1.96 Because -2 (first answer) is less than -1.96, reject the hypothesis. Z score of .05 = 1.64 a. =(x-hypothesis)/(stdev/√sample) =(52.5-50)/(8/√60) = 2.5/1.033 = 2.421 Reject the hypothesis if z > 1.64 Because 2.421 > 1.64, reject the hypothesis. b. =(x-hypothesis)/(stdev/√sample) =(51-50)/(8/√60) = 1/1.033 = 0.968

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Reject the hypothesis if z > 1.64 Because 0.968 < 1.64, do not reject the hypothesis. c. =(x-hypothesis)/(stdev/√sample) =(51.8-50)/(8/√60) = 1.8/1.033 = 1.743 Reject the hypothesis if z > 1.64 Because 1.743 > 1.64, reject the hypothesis. a. Hypothesis – u = 21.62 Alternative hypothesis – u doesn’t equal 21.62 b. P-value = 0.2576 ^^^(6.4807… is the square root of 42; 41 is the degrees of freedom (n-1)) (T-test is two-tailed because -1.1481 does not equal 21.62)

c. Don’t reject the null hypothesis because the rate of 5 CCF doesn’t differ from the rate of 5 CCF in Tulsa. d. Hypothesis – u = 21.62 Alternative hypothesis – u doesn’t equal 21.62 -- T-test value = -1.1481 -- A = 0.05; a/2 = 0.025 (divide by 2 because this is a two-tail test) Z 0.025 = critical value of + 1.96 Test stat.: < -1.96 and > 1.96

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