Chapter 12.6, Problem 25P

a

Summary Introduction

Interpretation:

Circumstances in which “The probability law describing the number of periods until the process goes out of control follows the geometric distribution” will fail.

Concept Introduction:

Geometric distribution consider a sequence of Bernoulli trials, with constant probability of success p in a single trial. 

b

Summary Introduction

Interpretation:

Circumstances in which “The assumption that an out of control condition corresponds to a a shift of the mean equal to $\delta$ $\sigma$ ” will fail.

Concept Introduction:

Standard deviation measures the spread of random variables or the given data from central tendency values or mean. It shows how far the deviation is from mean. A low value of standard deviation shows values are close to mean.

c

Summary Introduction

Interpretation:

Circumstance in which “ the assumption that the search cost is a fixed constant $a_2$ ” will fail.

Concept Introduction:

Search cost is a transaction cost. It shows the amount of costs required to find a better product. If the cost gets higher, it leads to increase in transaction cost, thereby becoming a loss to consumer.