2018-02-09 Test1S
2018-02-09 Test1S
MGEB11H3S – L01
Quantitative Methods in Economics I
63 Test 1 63
1453 1453
Ryan Friday February 9,02018 Ry a n Rya
101 e1 1 101
Upg rade 15:00 U–p17:00
g r a d
Upg rade
Victor Yu
First/Other63 63 63
1453 Names 1453 1453
0 1 Ryan 0 1 Ryan 0 1 Ryan
1
ade Student ade 1 ade 1
Upgr Number Upgr Upgr
63 63 5363
1453 1453 an9 1
4
0 1 Ryan 0 1 Ryan PageR1yof
1
ade 1 ade 1 ade10
Upgr Upgr Upgr
63 63 63
1453 1453 1453
0 1 Ryan 01 R
y a n
01 R
y a n
ade 1 Part I. Multiple Choice. ade31 marks in each question. No part mark. pgrade1
Upgr U p g r U
Circle only one answer. If there are more than one correct answer, circle the best one.
1. Suppose the 90th percentile of the GMAT scores is 680. Which one of the following statements
is most correct?
(a) 90% of the GMAT scores are higher than 680.
(b) 90% of the GMAT 5363 scores are equal to 680. 63
√(c) 90%Rof a n 14GMAT
the score are lower than 680. a n 1453 a
e 1 0 1 y e 1 0 1 Ry e 1 0 1 Ry
ad 680 GMAT scores are lower than 90.
(d) ad ad
Upgr Upgr Upgr
(e) 680 GMAT scores are higher than 90.
2. Which one of the following numerical measure is least sensitive to extreme values?
(a) mean √(b) median (c) 90th percentile
(d) standard deviation (e) range
3 3 3
4536 4536 4536
1
3.RyanA 1sample of 25 observations on the number 1 Ryof
1
ancars passing a point on a highway per minute
1 Ryanis
1
1 0 1 0 1 0
ade given as 10, 12, 11, …, 16. Given adefollowing calculations:
the ade
Upgr Upgr Upgr
10 +12+11+ … +16 = 350
10 2 12 2 112 ... 16 2 5764
The sample standard deviation is equal to
(a) 0.16 (b) 0.24 (c) 0.6 √(d) 0.8 (e) none of these
(a) 0.19 (b) 0.271 √(c) 0.729 (d) 0.81 (e) 0.90
63 63 63
1453 1453 1453
0 1 Ryan 0 1 Ryan 0 1 Ryan
ade 1 ade 1 ade 1
Upgr Upgr Upgr
Page 2 of 9
63 63 63
a n 1453 a n 1453 a n 1453
y y y
01 R R
e101and 𝑃(𝐵) = 0.4. Which one of the following 01 R
p g r ade1 8. Let A and B be two events, 𝑃(𝐴)
p g=r ad0.6 p g r ade1 is always
U U U
true?
(a) 𝑃(𝐴 ∪ 𝐵) = 1 (b) 𝑃(𝐵|𝐴) = 2/3
10. A financial analyst has determined that there is an 18% probability that a mutual fund will
outperform the market over a one-year period provided that it outperformed the market the
63 363 any year. What is the
a n 145312% of mutual funds outperform the market
previous year. Only
a n 145during
Ry
probability Ry Rya
101 that a mutual fund will outperform the market
101 two years in a row? 101
Upg rade Upg rade Upg rade
(a) 0.0144 √(b) 0.0216 (c) 0.0324 (d) 0.0432 (e) none of these
11. The probability that a visit to a particular car dealer results in neither buying a second-hand car
nor a Japanese car is 55%. Of those coming to the dealer, 25% buy a second-hand car and 30%
buy a Japanese car. What is the probability that a visit leads to buying a second-hand Japanese
63 63 63
a 1453
car?
n a n 1453 a n 1453
y y y
01 R √(a) 0.1 (b) 0.15 (c) 0.175 (d) 10.2
de 0
1 R (e) 0.225 01 R
p g r ade1 Solution: S=second-hand car, J=Japanese p g r acar. p g r ade1
U U U
𝑃[(𝑆 𝑜𝑟 𝐽)𝑐 ] = 0.55, 𝑃(𝑆) = 0.25, 𝑃(𝐽) = 0.30.
𝑃[𝑆 ∪ 𝐽] = 𝑃(𝑆) + 𝑃(𝐽) − 𝑃(𝑆 ∩ 𝐽), 1 − 0.55 = 0.25 + 0.30 − 𝑃(𝑆 ∩ 𝐽), 𝑃(𝑆 ∩ 𝐽) = 0.1
63 63
1453 1453
Ryan Ryan Rya
101 101 101
Upg rade Upg rade Upg rade
63 63 63
1453 1453 1453
0 1 Ryan 0 1 Ryan 0 1 Ryan
ade 1 ade 1 ade 1
Upgr Upgr Upgr
Page 3 of 9
63 63 63
a n 1453 a n 1453 a n 1453
y y y
01 R 1 R
de10 a sample of 10 different models of gday 01 R
p g r ade1 Questions 12–14. Outside Magazine
p g r tested
a p r ade1
hikers and
U U U
backpacking boots. The following data show the Upper Support and Price for each model
tested. Upper support is measured using a rating from 1 to 5, with a rating of 1 denoting
average upper support and a rating of 5 denoting excellent support.
Upper Price
Model Support5363 $
14
UpperSupport 2 Price 2 UpperSuppo
1453
63 rt Pr ice
1 1 Ryan 2 120 4 14400 Ry an
240 Rya
ade12
0
a d e101 rade
101
Upgr 3 125 9 r
Upg 15625 375 Upg
3 3 130 9 16900 390
. . . . . .
. . . . . .
. . . . . .
10 5 220 25 48400 1100
3 63 5363 63
1 4 5
Total 37 1400 145 n 14300000 5900 1453
1 Ryan Rya Ryan
a d e 1 0
a d e 101 ade 1 0 1
Upgr Upgr Upper Support and Price is closest to
12. The correlation coefficient between Upgr
(a) 0.6522 (b) 0.6950 (c) 0.7185 (d) 0.7522 √(e) 0.7845
Solution:
1
covUpperSupport, Pr ice 5900 37 1400 80
1
9 10
1 4 5363 1453
63
a n
1 UpperSuppo 1 2 a n a
0
var Ry rt 145
1
37 0.9 0 1 Ry 0 1 Ry
9 pgrad
ad e 1 e 1 ad e 1
Upgr 10 U Upgr
1 2
var Pr ice 300000 1400
1 104000
9 10 9
80
0.7845
Correlation coefficient = 0.9 104000 / 9
Upper 63
53Support and Price are highly correlated. nAs 5363 Support increases, Price increases 5363
n 14 14Upper n 14
ya ya ya
de101 R de1 01 R de1 01 R
Upgra 13. pgra
Suppose we add a number 2 Uto each value of Upper Support, and add a number
U pgra
50 to each
value of Price for each model. The correlation coefficient between Upper Support and Price
will
√(a) stay the same (b) increase (c) decrease (d) either increase or decrease
63 63
14. 1453 each value of Upper Support by 2, andanmultiply
Suppose we multiple
a n 1453 each value of Price by 3. a
1 0 1 Ry coefficient between Upper Support e
The ecorrelation and
1 0 Ry will
1Price e 1 0 1 Ry
Up grad grad
Up grad Up
√(a) stay the same (b) increase (c) decrease (d) either increase or decrease
63 63 63
1453 1453 1453
0 1 Ryan 0 1 Ryan 0 1 Ryan
ade 1 ade 1 ade 1
Upgr Upgr Upgr
Page 4 of 9
63 63 63
a n 1453 a n 1453 a n 1453
y y y
01 R 01 R de10
1 R
p g r ade1 Questions 15–16. In a group of 40 people,
p g r ade110 are healthy and every person the of pthe
g r aremaining 30
U U U
has either high blood pressure, a high level of cholesterol or both. Suppose 15 have high blood
pressure and 25 have high level of cholesterol.
15. How many people have both high blood pressure and a high level of cholesterol?
(a) 0.55 (b) 0.60 (c) 0.65 √(d) 0.75 (e) none of these
Questions 17–18, suppose you measure the number of minutes it takes an employee to complete a
task,53where
63 the maximum allowed time is 5 minutes, 63and each time is rounded to the nearest 45363
a n 14 a n 1453 an 1
1 R y minute. Data from 120 employees is summarized
1 R y below. 1 Ry
0 0 0
ade1 ade1 ade1
Upgr Upgr Upgr
Time (minutes) 1 2 3 4 5
Frequency 15 30 40 20 15
17. The median time for the employees to complete the task is closest to
(a) 2 minutes (b) 2.5 minutes √(c) 2.92 minutes (d) 3.12 minutes (e) 3.5 minute.
63 63 63
1453 1453 1453
0 1 Ryan 0 1 Ryan 0 1 Ryan
ade 1 ade 1 ade 1
Upgr Upgr Upgr
63 63
1453 1453
Ryan Ryan Rya
101 101 101
Upg rade Upgrade Upg rade
63 63 63
1453 1453 1453
0 1 Ryan 0 1 Ryan 0 1 Ryan
ade 1 ade 1 ade 1
Upgr Upgr Upgr
Page 5 of 9
63 63 63
1453 1453 1453
0 1 Ryan 01 R
y a n
0 1 Ryan
ade 1 Part 2. pShow ade1
your work in all questions. ade 1
Upgr U g r Upgr
19. (10 points)
A fair die is rolled and then a fair coin is tossed n times where n is the number showing on the
die. Find the probability that no heads appear.
(10 points)
Solution: number outcome of
On die
63 no head appears Probability 5363
n 1453 14
Ry a 1 1 Ryan 1 Ry
a
ad e 1 0 1 1 T d e 1 0 1
ad e 1 0
Upgr 6 Up2gra Upgr
2
1 1
2 TT
6 2
3
1 1
3 TTT
63 6 2 63 63
1453 1453 1453
0 1 Ryan y
1 1R 1
a n 4
1 Ryan
ade 1 4 TTTT pgrade10 ade 1 0
Upgr U 6 2 Upgr
5
1 1
5 TTTTT
6 2
6
1 1
6 TTTTTT
1453
63 6 2 1453
63
Ryan Ryan Rya
101 101 101
rade
Upg Probability of no head shows is Upg rade Upg rade
2 3 4 5 6
1 1 1 1 1 1 1 1 1 1 1 1
+ + + + +
6 2 6 2 6 2 6 2 6 2 6 2
1 1 1 1 1 1 32 16 8 4 2 1 63 21
= = = =
12 24 48 96 192 384 384 384 128
63 63 63
1453 1453 1453
0 1 Ryan 0 1 Ryan 0 1 Ryan
ade 1 ade 1 ade 1
Upgr Upgr Upgr
63 63
1453 1453
Ryan Ryan Rya
101 101 101
Upg rade Upg rade Upg rade
63 63 63
1453 1453 1453
0 1 Ryan 0 1 Ryan 0 1 Ryan
ade 1 ade 1 ade 1
Upgr Upgr Upgr
Page 6 of 9
63 63 63
n 1453 1453 1453
01 R
y a
0 1 Ryan 0 1 Ryan
r ade1 20. (10 points) ade 1 ade 1
U p g Upgr Upgr
In a large corporation, 80% of the employees are men and 20% are women. Among the men, 10%
of them had graduate training, 30% had undergraduate, and 60% had high school. Among
the women, 15% had graduate training, 40% had undergraduate and 45% had high school.
(a) (7 points)
What is the probability 363that a random chosen employee who has 1graduate 3 training is a man?
n 1W45=women, n 4536
Solution: Let M=men, a G=graduate training, a
U=undergraduate, and H=high school. a
e 1 0 1 Ry e 1 0 1 Ry e 1 0 1 Ry
ad
Upgr 1. P(G M ) 0.10 P(G ad
UpgrM ) (0.10)(0.80) 0.08 Upgr
ad
Method
P(G) P(G M14) 53P 63G W P(G M ) P(M ) PG | W PW 45363
n 1= 0.11
Ry a Ryan Rya
0 1 PM G 0.08 8 0 1 101
UpgPr M | G
ade1 0.7273Upgrad
e1 rade
Upg
PG 0.11 11 .
Method 2. G U H Total
M 0.08 0.24 0.48 0.80
W 0.03 0.08 0.09 0.20
Total 0.11 0.32 0.57 1.00
63) 0.1
we have P(G M ) P(Gy|aM 36)3 (0.1)(0.8) 0.08
45| 3M 63
Since P(1G
a n , n
)1P4(5M . Similarly we ycana n 1453
y
01 R 01 R 01 R
r ade1 calculate other joint probabilities in the ade1 table.
above
r r ade1
PG M 0.08U 8
U p g p g U p g
PM | G 0.7273
PG 0.11 11
(b) (3 marks)
Are gender and level of education independent? You must justify your answer using the
definition of independence.
Solution: From part (a), 4P
153M
63 0.80 , PG 0.11 and PM | G 0.7273
1 4536. Since PM | G PM .
3
yan yan Rya
Gender and 01 Rof education are not independent.
e1level e101
R
101
d d rade
Or: PM G 0.08 PM PG . Gender and level of education are not independent.
r a r a
Upg Upg Upg
63 63 63
1453 1453 1453
0 1 Ryan 0 1 Ryan 0 1 Ryan
ade 1 ade 1 ade 1
Upgr Upgr Upgr
Page 7 of 9
63 63 63
n 1453 1453 1453
01 R
y a
0 1 Ryan 0 1 Ryan
r ade1 21. (12 points) ade 1 ade 1
U p g Upgr Upgr
Assume that the weekly income of people in Africa follows a bell shape distribution with mean
$160 and standard deviation $40. Suppose incomes are classified into 3 categories as follow:
Category Description
High Income weekly income higher than $200
Mid Income weekly
3 income between $120 and $200 63
4536
1weekly 1453
Ryan
Low income income lower than $120
01 R
y a n Rya
101 1 101
Upg rade Upg rade Upg rade
Furthermore, 80% of people in the high income category own cars; 50% of people in the mid
income category own cars; and 20% of people in the low income category own cars.
Suppose a person in Africa is selected at random and this person owns a car. What is the
probability that this person is in the high income category?
63 63 (12 points) 5363
n 1453 n 1453 14
1 R y a
Method 1. Let H=high income, M=mid income,1 R y a
L=low income, O=own cars. 1 R yan
0 10 H ) (0.16)(0.8) 0.128 0
ade1 P(O | H ) 0U.p8graPde
(O ade1
Upgr Upgr
P(H)=0.16
P(Oc H ) 0.2 P(Oc H ) (0.16)(0.2) 0.032
P(O) P(5O363 H ) PO M PO L P(O H ) P( H5) 36P 3 O | M PM PO | L PL 63
a n 1 4
a n 1 4
a n 1453
R y y y
01=(0.16)(0.08)+(0.05)(0.68)+(0.02)(0.16)=0.5 01 R 01 R
g r ade1 g r ade1 g r ade1
P H | O
U p P H O 0.128 p
U 0.256 U p
PO 0.5 .
Method 2. Since P(O | H ) 0.8 , we have P(O H ) P(O | H ) P( H ) (0.8)(0.16) 0.128 .
Similarly we can calculate other joint probabilities and write down the following probability
distribution table.
5363
14H M L Total 1453
63
a n a n a
e 1 0O1 Ry 0.128 0.34 0.032
e
0.5
1 0 1 Ry e 1 0 1 Ry
ad O c ad ad
Upgr 0.032 0.34 Upgr
0.128 0.5 Upgr
PH O 0.128
P H | O 0.256
Hence 63 PO 0.5 . 63 63
1453 1453 1453
0 1 Ryan 0 1 Ryan 0 1 Ryan
ade 1 ade 1 ade 1
Upgr Upgr Upgr
Page 8 of 9
63 63 63
n 1453 1453 1453
01 R
y a
0 1 Ryan 0 1 Ryan
r ade1 22. (14 points) ade 1 ade 1
U p g Upgr Upgr
Bill and Mark take turns picking a ball at random from a bag containing four red balls and
seven white balls.
(a) (6 points)
The balls are drawn out of the bag without replacement and Mark is the first person to start.
What is the probability that Bill is the first person to pick a red ball?
Solution: Let B be the event 63 that Bill picks a red ball, M be the event that
536Mark
3 picks a red ball.
The balls R area n 1453 without replacement and Mark is the afirst
drawn n 14person to start, the probability a
e 1 0 1 y e 1 0 1 Ry e 1 0 1 Ry
ad Bill is the first person to pick a red ball is pgrad
that ad
Upgr 𝑐 U Upgr
𝑃(𝑀 𝐵, 𝑀𝑐 𝐵 𝑐 𝑀𝑐 𝐵, 𝑀𝑐 𝐵 𝑐 𝑀𝑐 𝐵 𝑐 𝑀𝑐 𝐵, … )
=𝑃(𝑀𝑐 𝐵) + 𝑃(𝑀𝑐 𝐵 𝑐 𝑀𝑐 𝐵) + 𝑃(𝑀𝑐 𝐵 𝑐 𝑀𝑐 𝐵 𝑐 𝑀𝑐 𝐵) + 𝑃(𝑀𝑐 𝐵 𝑐 𝑀𝑐 𝐵 𝑐 𝑀𝑐 𝐵 𝑐 𝑀𝑐 𝐵)
7 4 7 6 5 4 7 6 5 4 3 4 7 6 5 4 3 2 4
=11 × 10 + 11 × 10 × 9 × 8 + 11 × 10 × 9 × 8 × 7 × 6 + 11 × 10 × 9 × 8 × 7 × 6 × 5
7 6 5 4 3 2 1 4
+
63 × 10 × 9 × 8 × 7 × 6 × 5 × 4 63 63
1453 11 1453 1453
0 1 Ryan 0 1 Ryan 0 1 Ryan
ade 1 14 7 1 1 84+35+10+1 a130 1
de = 13 ade 1
Upgr =55 + 66 + 33 + 330 = pg=r Upgr
330 U 330 33
(b) (8 points)
The balls are drawn out of the bag with replacement and Mark is the first person to start.
What is the probability that Bill is the first person to pick a red ball?
Solution: Let B be the event that Bill picks a red ball, M be the event that Mark picks a red ball.
63 5363 to start, the probability
The balls areandrawn 1453 without replacement and Mark is the afirstn 14person a
y 1 Ry 1 Ry
1 01isRthe first person to pick a red ball is
thatdeBill e 1 0 e 1 0
ra 𝑐
Upg𝑃(𝑀 rad Upgr
ad
𝐵, 𝑀𝑐 𝐵 𝑐 𝑀𝑐 𝐵, 𝑀𝑐 𝐵 𝑐 𝑀𝑐 𝐵 𝑐 𝑀𝑐 𝐵, … ) Upg
=𝑃(𝑀𝑐 𝐵) + 𝑃(𝑀𝑐 𝐵 𝑐 𝑀𝑐 𝐵) + 𝑃(𝑀𝑐 𝐵 𝑐 𝑀𝑐 𝐵 𝑐 𝑀𝑐 𝐵) + ⋯
7 4 7 3 4 7 5 4 7 7 4
=11 × 11 + (11) (11) + (11) (11) + (11) (11) + ⋯
7 4 7 2 7 4 7 6 7 4 1 7×4 7
=114×5311
63[1 + (11) + (11) + (11) + ⋯ ] = 11 × 11 [ 3
4536 7 2
]= = 18 63
1 1 1−( ) 72 1453
0 1 Ryan 0 1 Ryan 11
0 1 Ryan
ade 1 ade 1 ade 1
Upgr Upgr Upgr
63 63
1453 1453
Ryan Ryan Rya
101 101 101
Upg rade Upg rade Upg rade
63 63 63
1453 1453 1453
0 1 Ryan 0 1 Ryan 0 1 Ryan
ade 1 ade 1 ade 1
Upgr Upgr Upgr
Page 9 of 9