Integrated Business Foundation

Module 9. Decision-making Skills

Practice Problems I
Statistics Fundamentals, Probability and Probability
Distributions, Confidence Intervals and Hypothesis Testing

(For practice only; no submission is required)

Sep 2025

Please bring this problem set to each tutorial session.

1
Statistics Fundamentals
1. The following table lists information collected from a random sample of ten HKMU students in a survey. The
objective of the survey is to find out how HKMU’s students in general think that email communication between
tutors and students is effective to facilitate learning.

Location of Number of Typing Is Email

Respondent Sex Age* Residence Courses Taken Time** Effective?***
Tom Chan Male 32 HK 4 3.23 2
Sabrina Lau Female 23 KLN 5 2.22 1
Hedi Tse Female 26 NT 2 1.97 3
John Wong Male 34 NT 1 2.75 4
Mary Chiu Female 43 HK 6 3.20 3
Keith Yip Male 37 NT 8 1.58 2
Jay Barfield Male 30 KLN 7 2.67 2
Shan Ying Chan Male 23 HK 4 2.50 2
Mabel Lee Female 30 KLN 3 4.05 5
Queenie Cheung Female 28 NT 5 6.12 1
*recorded to the nearest years
** the time (in minutes) it took in typing the last email to tutor
*** the scale adopted is: 1- Strongly Agree; 2- Agree; 3- Neutual/Don’t Know; 4- Disagree; 5-Strongly Disgree

(a) Identify the population, the parameter of interest, the sampling frame for the aforementioned survey.
(b) List all the variables and differentiate whether they are of quantitative or of qualitative.
(c) For those quantitative variables, differentiate whether they are of discrete or of continuous.
(d) For those qualitative variables, differentiate whether they are of nominal or of ordinal.
(e) Determine whether the above data are of cross-sectional data or of time-series-data.

2. The general manager of a chain of medical centers is evaluating the patient satisfaction at the center. A survey was
conducted on a random sample of 50 patients. The following table displays some partial results of the survey –– the
consultation time (in minutes) during their last visit.

8.9 14.7 3.3 9.6 13.9 7.7 10.8 4.6 11.1 12.5
9.8 4.6 7.3 13.3 12.4 4.6 4.9 4.8 6.3 4.1
15.4 6.8 11.4 6.7 6.5 8.5 7.4 5.3 4.5 7.3
10.2 9.8 5.7 5.4 11.7 5.2 6.2 5.8 8.2 9.6
3.5 8.5 9.8 12.5 7.3 3.8 3.4 4.6 5.2 8.7

(a) Compute the mean, the mode, the median and the standard deviation of the above sample data.
(b) Use Excel to construct a frequency distribution and a histogram to summarize the sample data by grouping
them into seven classes. Begin the first class at ‘more than 3 but less than or equal to 5’, and end with the last
class at ‘more than 15 but less than or equal to 17’. By comparing two relevant measures of central tendency of
the sampled data, identify the shape of the distribution.

2
3. The numbers of bottles sold of a newly released Yunzhi essence tablet during a seven-day promotional period at 40
randomly selected booths are given below:

272 251 286 256 286 256 270 282 256 253
277 263 285 270 259 260 252 261 265 265
272 281 256 265 262 255 269 262 258 253
278 269 283 281 260 252 254 268 289 283

(a) Compute the mode, median, mean and standard deviation of the sampled data.
(b) Use Excel to construct a frequency distribution and a histogram to summarize the sampled data. Begin your
first class at ‘250 but less than or equal to 255’, and end with the last class at ‘285 but less than or equal to 290’.

3
Answer Key:
1. (a) The population is all the HKMU students; the parameter of interest is the proportion of students who think email
communication between tutors and students is effective to facilitate learning; the sampling frame is a listing of
all the HKMU students.
(b) ‘Age’, ‘Number of Courses Taken’ and ‘Typing Time’ are quantitative whereas ‘Sex’, ‘Location of
Residence’ and ‘Is Email Effective’ are qualitative.
(c) ‘Number of Course Taken’ and ‘Age’ are discrete. ‘Typing time’ is continuous if no rounding is performed.
(d) ‘Sex’ and ‘Location of Residence’ are nominal. ‘Is Email Effective’ is ordinal.
(e) The data are cross-sectional data.

2. (a) x 
x i
 7.882 ; Median = 7.3; Mode = 4.6;
n
n

 x  x 
i 1
i
2

s  3.2385
n 1
(b)
Frequency Distribution for the consultation time
Bin Frequency
5 12
7 11
9 10
11 7
13 6
15 3
17 1

Histogram of the consultation time of 50 patients

14
12
10
Frequency

8
6
4
2
0
5 7 9 11 13 15 17
Consultation time (mins)

Since Mean > Mode, the distribution is skewed to the right.

3.
(a) Mode = 256; Median = 265; x  266 .875; s  11.5563

(b) Frequency Distribution for the numbers of bottles sold

of Yunzhi essence tablet at 40 randomly selected booths

Class Frequency

4
 255 7
260 8
265 7
270 5
275 2
280 2
285 6
290 3

Numbers of bottles sold of Yunzhi essence

tablet at 40 randomly selected booths
Frequency

Number of bottles

5
Probability and Probability Distributions
1. A random experiment corresponds to drawing a number from 1 to 16 with the following events defined:
A  2,4,5,6,7,8,9; B  1,3,5,7,9,11,13,15; C  2,9,10,11,12,13,14,15,16
(a) What is A?
(b) What is A C ?
(c) What is B C ?
(d) What is A C ?
(e) What is D if D  A  C ?

2. A factory manufactures a product that is susceptible to two types of defect. The probability that a product has defect
X and Y are 0.15 and 0.14 respectively. The probability that a product has both defects is 0.08. What is the
probability that a randomly selected product has
(a) either defect X or Y?
(b) defect X but not defect Y?
(c) neither defects?
(d) either defect Y or no defect X?

3. The HR manager of a large corporation has recorded for the last year the daily number of staff applying sick leave.
The following table shows the manager's assessment for the corresponding probability distribution of the random
variable representing the daily number of sick leave application.
Daily number of sick leave 0 1 2 3 4 5 6
Probability 0.04 0.18 0.22 0.30 0.14 0.04 0.08

Let X be the event that represents 'the daily number of sick leave is more than 3' and Y be the event that represents '
the daily number of sick leave is less than or equal to 4'.
(a) Find the probability of event X.
(b) Find the probability of event Y.
(c) Find the probability of the intersection between events X and Y.
(d) Are events X and Y mutually exclusive? Explain.
(e) Are events X and Y collectively exhaustive? Explain.

6
4. A large corporation has two departments, A and B. Department A has 150 employees (30 of whom are male) and
Department B has 100 employees (20 of whom are female).
(a) Complete in the following contingency table.
M (Male) F (Female) Total
A (Dept A)
B (Dept B)
Total
(b) If one employee is randomly chosen from the corporation, what is the probability that the employee works in
Department A? State whether this is a marginal or joint probability.
(c) If one employee is randomly chosen from the corporation, what is the probability that the employee is a man
who works at Department A? State whether this is a marginal or joint probability.
(d) Given that one employee is randomly chosen from the female staff, what is the probability that she works at
Department B?
(e) Given that one employee is randomly chosen from Department A, what is the probability that the employee is
not a man?
(f) Construct a probability tree to display all the involved marginal, conditional and joint probabilities in
theoretical expression with respect to the above situation. (You are not required to put down the numerical
value of the probabilities.)

3. There are three departments in a computer software company: X, Y and Z. Department X, Y and Z have 20, 15 and
40 staff respectively and among these groups, 7, 5 and 18 of them possess computer-related qualifications
respectively.

(a) Complete in the following contingency table.

Department
Qualification X Y Z Total
Q
Q
Total
(Q – possesses qualification; Q – does not possess qualification)
(b) A staff member is randomly selected from the company. Knowing that the staff member selected does not
possess computer-related qualification, what is the probability that this person works in department X?
(c) A staff member is randomly selected from the company. Knowing that the staff member selected works in
department Z, what is the probability that this person possesses computer-related qualification?
(d) A staff member is randomly selected from the company. Knowing that the staff member selected does not work
in department Y, what is the probability that this person does not possess computer-related qualification?

7
6. With reference to Question 3, find the expected daily number of sick leave and the variance of the daily number of
sick leave.

7. According to past records, it is known that 65% of the customers of ABC Airline utilize online check-in services
before they arrive at the airport. Ten independent travelers have just arrived at the counter of ABC Airline in the
airport, what is the probability that exactly five of them have already utilized online check-in services to check in for
their flights?

8. A manufacturer produces inexpensive ball-point pens. It is known that 4% of its products are defective. The pens are
sold in packets of six.
(a) What is the probability of getting one defective pen in a packet?
(b) What is the probability of getting four non-defective pens in a packet?
(c) What is the probability that a packet contains more defective pens than non-defective pens? Give your answer
to an accuracy of nine decimal places.

9. A large insurance company has discovered that from past experience, the average monthly number of claims for the
coverage on household insurance is 3. Assume that the number of claims in a month for that particular type of
insurance follows a Poisson distribution, what is the probability that
(a) three or fewer claims will be filed in a particular month?
(b) five or more claims will be filed in a particular month?

10. Based on past records, the number of patients X, that are admitted into the hospital during a one-hour interval
follows a Poisson distribution with an average rate of 5 patients per hour.
(a) What is the probability that three patients were admitted into the hospital during a particular one-hour interval?
(b) What is the probability that nine patients were admitted into the hospital within three hours?

8
11. A Biology teacher has found that the final examination scores of an introductory course are normally distributed
with a mean of 75 and a standard deviation of 18.
(a) What is the probability of a student getting at most a score of 96 on this examination?
(b) What percentage of students scored between 68 and 88?
(c) By convention, the teacher would award an A grade to 20% of the class in the examination. What is the
expected minimum score to obtain an A grade in the examination?

12. An achievement test administered to aircraft pilot trainees requires a series of operations to be performed in quick
succession. Suppose that the time needed to complete the test is normally distributed with a mean of 90 seconds and
a standard deviation of 20 seconds.
(a) To pass the test, a candidate must complete it within 80 seconds. What percentage of the candidates will pass
the test?
(b) If the top 5% of the candidates are to be given a certificate of commendation, what is the expected time (in
seconds) for a candidate to be eligible for a certificate?

13. An auto beverage dispenser of a coffee machine is set to discharge coffee with an average of 200 ml per cup. The
discharge volume is normally distributed, with a standard deviation of 4.8 ml.
(a) What is the probability that a particular cup will contain more than 194 ml and less than 210 ml of coffee?
(b) If a paper cup with volume 198 ml is used in a particular discharge, what is the probability it will be overfilled?
(c) How large a paper cup should be used (in ml) if the proportion of overfill is expected to be less than 3%?

9
Answer Key:
1 (a) A  1,3,10,11,12,13,14,15,16
(b) A C  2,9
(c) B C  1,2,3,5,7,9,10,11,12,13,14,15,16
(d) A C  1,3,4,5,6,7,8,10,11,12,13,14,15,16
(e) D  10,11,12,13,14,15,16

2. (a) PX  Y   PX   PY   PX  Y   0.15  0.14  0.08  0.21 0.02;
(b)  
P X  Y  PX   PX  Y   0.15  0.08  0.07
(c) PX  Y   PY   PX  Y   0.86  0.07  0.79
(d) PX  Y   PX   PY   PX  Y   0.85  0.14  0.06  0.93

3. (a) PX   0.14  0.04  0.08  0.26

(b) PY   0.04  0.18  0.22  0.3  0.14  0.88
(c) P X Y   0.14
(d) No, since P X Y   0 ;
(e) Yes, since P X Y   1

4. (a) Let A and B be the events that an employee works at department A and B respectively.
Let M and F be the events that an employee is a male and a female respectively.
Consolidate the given information into a table on the left given below to obtain the result that follows:
A B Total A B Total
M 30 M 30 80 110
F 20 F 120 20 140
Total 150 100 Total 150 100 250

(b)
P  A 
150
 0.6
250
Marginal probability
(c)
P M  A 
30
 0.12
250
Joint probability
P B  F  20
P B F  
(d)
  0.1429
P F  140
P F  A 120
P F A 
(e)
  0. 8
P  A 150
(f)

P B 

5. (a)

10
 X Y Z Total
Q 7 5 18 30
Q 13 10 22 45
Total 20 15 40 75

  PPXQ Q   1345  0.2889

(b) P X Q 

PQ  Z  9
(c) P Q Z     0.45
PZ  20

  PQPYY   127  0.5833

(d) P Q Y 

6. Let N be the random variable that represents the daily number of sick leave.
The expected daily number of sick leave and the variance of the daily number of sick leave are  N and  N2 where
N  0  0.04   1 0.18  2  0.22   3  0.3  4  0.14   5  0.04   6  0.08  2.76
 N2  0  2.76 2  0.04   1  2.76 2  0.18   2  2.76 2  0.22   3  2.76 2  0.3
 4  2.76 2  0.14   5  2.76 2  0.04   6  2.76 2  0.08   2.2624

7. Let X be the number of customers who utilize online check-in services before they arrive at the airport.

P X  510 C5 0.65 0.35 = 0.15357041071  0.1536

5 5

8. Let X be the r.v. representing the number of defective ball-point pens in a packet. X ~ Bin(6, 0.04).
(a) P X  16 C1 0.041 0.96 5  0.1956894474  0.1957
(b) P X  26 C2 0.042 0.96  0.02038431744  0.0204
4

(c) P X  4  P X  4  P X  5  P X  6  0.0000353894 4  0.0000005898 24  0.0000004096

 0.000035983

9. Let X be the r.v. that represents the number of claims in a month. X ~ Po(3).
(a) PX  3  PX  0  PX  1  PX  2  PX  3
 0.049787068  0.149361205  0.224041808  0.224041808  0.647231889  0.6472
(b) PX  5  1  PX  5  1  PX  0  PX  1  PX  2  PX  3  PX  4
 1  0.647231889  0.168031356   1  0.815263245  0.184736755  0.1847

10. (a) Let X be the r.v. that represents the number of patients that were admitted into the hospital. X ~ Po5 .
e 5  53
P X  3   0.1404
3!
(b) Let Y be the r.v. that represents the number of patients that were admitted into the hospital. Y ~ Po15
15
159
PY  9 
e
 0.0324
9!

11
11. 
Let X be the r.v. that represents the final examination score. X ~ N 75, 18 2 
 X   96  75 
(a) P X  96   P    PZ  1.17   0.5  0.3790  0.8790
  18 

 68  75 X   88  75 
(b) P68  X  88   P     P 0.39  Z  0.72   0.1517  0.2642  0.4159  41.59%
 18  18 
(c) Let the expected score be A.
 X   A  75  A  75
P X  A  0.2  P    0.2   0.84  A  18  0.84   75  90.12
  18  18


12. Let X be the r.v. that represents the time it takes to complete the test. X ~ N 90, 20 2 
 X   80  90 
(a) P X  80   P    PZ  0.5  0.5  0.1915  0.3085  30.85%
  20 
 X   T  90  T  90
(b) P X  T   0.05  P    0.05   1.645  T  20   1.645   90  57.10
  20  20

13. (a) Let X be the random variable representing the discharge volume. X ~ N 200, 23.04 
 194  200 X   210  200 
P194  X  210   P     P 1.25  Z  2.08   0.3944  0.4812  0.8756
 4.8  4.8 

 X   198  200 
(b) P X  198   P    PZ  0.42   0.5  0.1628  0.6628
  4.8 

(c) Let V be the volume of the cup to be used.

P X  V   0.03
 X   V  200  V  200
P    0.03   1.88  V  209 .024
  4.8  4.8

12
Sampling Distributions
1. A population consists of the five numbers 2, 3, 6, 8, and 11. Consider all possible samples of size two that can be
drawn with replacement from this population. Find
(a) the mean of the population;
(b) the standard deviation of the population;

(c) the mean of the sample mean  X ; 

(d) the standard deviation of the sample mean  X . 

2. The lifetime of a new brand of clock battery is normally distributed with a mean of 8,200 hours and a variance of
2,500 hours.
(a) If a person is to buy one battery, what is the probability that it will last for more than 8,300 hours?
(b) A random sample of 40 clock batteries of this brand was selected.
(i) What is the probability that the sample mean lifetime will be between 8,210 and 8,220 hours?
(ii) There is a chance of 0.95 that the sample mean lifetime will be less than t hours. What is the value of t?

3. A listed corporation is considering issuing a new convertible bond. The CEO of the corporation believes that the
terms of the offer will be found attractive by about 20% of all its current stockholders. Suppose that this belief is
correct and a random sample of 130 current stockholders of this corporation is taken.
(a) What is the standard error of the sample proportion for those who find this offer attractive?
(b) What is the probability that the sample proportion is more than 15%?
(c) What is the probability that the sample proportion is between 18% and 22%?

13
Answer Key:
2  3  6  8  11
1. (a) X  6
5

(b) X 
2  62  3  62  6  62  8  62  11  62  10 .8  3.286335345
5
(c) Population (X): 2, 3, 6, 8, and 11
All possible samples of size 2 (selection with replacement) All possible respective sample means:
(2, 2) (2, 3) (2, 6) (2, 8) (2, 11) 2 2.5 4 5 6.5
(3, 2) (3, 3) (3, 6) (3, 8) (3, 11) 2.5 3 4.5 5.5 7
(6, 2) (6, 3) (6, 6) (6, 8) (6, 11) 4 4.5 6 7 8.5
(8, 2) (8, 3) (8, 6) (8, 8) (8, 11) 5 5.5 7 8 9.5
(11, 2) (11, 3) (11, 6) (11, 8) (11, 11) 6.5 7 8.5 9.5 11

2  2.5  4  5    8.5  9.5  11

X 6;
25

(d)  X 
2  62  2.5  62  4  62    9.5  62  11  62  2.3237900077 2
25
X 3.286335345
[Check:  X   X ;  X    2.3237900077 3 ]
n 2

2. Let X be the lifetime of the clock battery. X ~ N 8,200, 2,500 

 X   8,300  8,200 
(a) P X  8,300   P    PZ  2  0.5  0.4772  0.0228
  50 
 8,210  8,200 X   8,220  8,200 
(b) (i) P8,210  X  8,220   P   
 50 / 40 / n 50 / 40 
 P1.26  Z  2.53  0.4943  0.3962  0.0981

 X   t  8,200 
 
(b) (ii) P X  t  0.95  P    0.95
  / n 50 / 40 
t  8,200
 1.645   8,200  8,213 .00
50
  1.645  t 
50 / 40 40
3. (a) p  0.2; n  130
p  1  p  0.2  1  0.2
 pˆ    0.0350823207 7
n 130
 pˆ  p 0.15  0.2 
(b) P pˆ  0.15   P   P Z  1.43  0.5  0.4236  0.9236 0.9236
  pˆ 0.0350823207 7 

 0.18  0.2 pˆ  p 0.22  0.2 
(c) P0.18  pˆ  0.22   P  
 0.0350823207 7  p̂ 0.0350823207 7 

 P 0.57  Z  0.57   0.2157  0.2157  0.4314

14
Confidence Intervals
1. From a random sample of 36 deliveries of a pizza restaurant, it was found that the average delivery time was 18.5
minutes with a standard deviation of 3.6 minutes, i.e.:
(a) If a confidence interval is to be constructed to estimate the true average delivery time, which probability
distribution is the exact theoretical distribution to be utilised?
(b) What are the respective confidence limits at 95% level of confidence?
(c) What are the respective confidence limits at 99% level of confidence?

2. The PQR Company wishes to estimate its average daily usage of flour. With a sample of 14 days, the sample mean
turns out to be 173 pounds, with sample standard deviation equals 47.82 pounds. From past experience, it is known
that the population standard deviation equals 45 pounds. If the distribution of the usage X pounds of flour is
approximately normal, construct a 95% confidence interval for the true average daily usage of flour.

3. A random sample of 150 clerical office workers shows that 33 of them have an income over $8000. Find a 90%
confidence interval for the proportion of all clerical office workers who have incomes over $8000.

4. The manager of human resources of a large corporation concerns about the average monthly expense of duty visit
reimbursed by its employees. Accordingly, 20 respective employees were randomly selected from different
departments of the corporation to form a sample. The sample average monthly expense of duty visit turned out to be
$1,250. Assume that the monthly expenses of duty visit reimbursed by the employees are normally distributed and
the population standard deviation is known to be $150.
(a) Construct a 90% confidence interval for the true average monthly expense of duty visit reimbursed by the
employees of the corporation.
(b) What sample size is required if the manager wishes to be 95% confident that the sample average monthly
expense is correct to within $50 of the true average monthly expense?

15
5. The customer service manager of a large cosmetic corporation wishes to estimate the true average consultation time
it takes to serve a client in their promotion booth. The consultation times of 20 randomly selected clients is given as
follows (in minutes):
4.4 3.8 4.6 2.7 3.0 5.0 3.8 4.7 4.2 5.3
4.5 4.1 4.9 4.3 1.6 2.8 0.8 3.4 1.6 6.2
(a) If the consultation time is normally distributed, construct a 95% confidence interval estimate for the true
average time that it takes to serve a client. Keep your final answers to two decimal places.
(b) If the consultation time is normally distributed and the population standard deviation is known to be 1.5
minutes, what sample size would be required if the manager wishes to be 98% confident that the sample
average is correct to within 0.5 minutes of the true average service time?

6. (a) A survey is planned to determine the average annual family medical expenses of employees of a large
company. The management of the company wishes to be 95% confident that the sample average is correct to
within $50 of the true average expenses. A pilot study indicates that the true standard deviation can be
estimated to be $400. How large a sample size is necessary?
(b) A magazine for professional teachers plans to determine the proportion of secondary school teachers of its
subscribers. The manager in charge wants the probability to be 0.98 that the sample proportion differs from the
population proportion by no more than 0.06. How large should the sample be?

16
Answer Key:

1. (a) The t-distribution with 35 degrees of freedom.

 18 .5  1.218  17.282 , 19.718 
S 3.6
(b) X  t n 1,  / 2   18 .5  2.030 
n 36

 18 .5  1.6344  16.8656 , 20.1344 

S 3.6
(c) X  t n 1,  / 2   18 .5  2.724 
n 36

 149 .4276 , 196.5724 
45
2. X  Z / 2   173  1.96 
n 14
pˆ  1  pˆ  0.22  1  0.22 
3. pˆ  Z / 2   0.22  1.645   0.1644 , 0.2756 
n 150

 1,250  1.645  33 .54101966   1,250  55 .17497734

S 150
4. (a) X  Z / 2   1,250  1.645 
n 20
 (1194.83, 1305.17)

(b) n  Z    1.96  150  34.5744  Rounded up to 35

2 2 2 2

2 2
W 50
5. Let X be the r.v. representing the consultation time.

(a) X 
X i
 3.785; S 
 X i X 2
 1.3600599832
n n 1

 3.15, 4.42 
S 1.3600599832
X  tn 1,  / 2   3.785  2.093 
n 20
(b) n  Z  / 2    2.326 1.5  48.6925  Rounded up to 49
2 2 2 2

W2 0.5 2

(a) n  Z  / 2     1.96  400   245.8624  Rounded up to 246

2 2 2 2
6.
2 2
W 50
(b) n  Z / 2   p  1  p   2.326  0.5  0.5  375.7136  Rounded up to 376
2 2

2 2
W 0.06

17
Hypothesis Testing for One Population
1. Mr Wong is the production manager of a factory producing mobile phones. One of his key responsibilities is to
monitor the output to ensure that the proportion of products that are identified to be of substandard is less than 0.5%.
Hence, he periodically selects random sample of the items produced to perform a hypothesis test accordingly.
(a) State the corresponding H 0 and H1 for the hypothesis test conducted by Mr Wong.
(b) For the given context, what is a type I error and what is a type II error? Explain briefly.
(c) Which type of error might customers of the mobile phones consider more serious? Explain briefly.

2. The quality-control department of a food-processing firm specifies that the average net weight per package of cereal
should be more than 20 gm. Experience has shown that the population of weights are approximately normally
distributed with a standard deviation of 1.65 gm. A random sample of 15 packages yields a mean weight of 21.2 gm.
(a) At the 0.05 level of significance, is there sufficient evidence to indicate that the true mean weight of the
packages has met the required weight level?
(b) Use the 'p-value' approach to test the hypothesis in part (a).

3. An insurance company is reviewing its current policy premium of a particular kind of insurance and therefore the
average claim amount is of concern. It is believed by the underwriter that the recent average claim amount should be
less than $2,000. Accordingly, a random sample of 12 claims made recently is randomly selected, and the sample
mean and the sample standard deviation turn out to be $1,750 and $780 respectively.
(a) At the 0.05 level of significance, is there enough evidence to reveal that the average claim amount is less than
$2,000? What assumption must you make in order to make the test an appropriate one?
(b) Use the p-value approach to test the hypothesis at the same level of significance.

4. The general manager of a courier service company wishes to conduct a hypothesis test to determine whether the
mean weight of package collected under the jumbo flat rate scheme equals to 45 pounds or not. A random sample of
25 packages was selected and the weight of each package was recorded. The corresponding sample mean is 43.5
pounds with a sample standard deviation of 16 pounds. At the 0.05 level of significance, what would the result of the
hypothesis test be? What assumption must you make in order to make the test an appropriate one?

18
5. The manufacturer of a patent medicine claimed that effective rate is over 90% in relieving an allergy for a period of
8 hours. In a sample of 200 people who had the allergy, the medicine provided relief for 185 people. Determine
whether the manufacturer's claim is justified or not at the 1% level of significance.

19
Answer Key:

1. (a) H 0 : The proportion of substandard products is at least (not less than) 0.5%.
H1 : The proportion of substandard products is less than 0.5%.
(b) A type I error means that the actual proportion of substandard products is at least 0.5% but it was considered to
be smaller.
A type II error means that the actual proportion of substandard products is less than 0.5% but it was considered to
be larger.
(c) Customers might consider a type I error be more serious since its consequence implies a higher chance of buying
a low quality mobile phone.

2. (a) H 0 :   20 H1 :   20
Since 2.8167 > 1.645, reject H 0 .
(b) p-value = 0.5 – 0.4976 = 0.0024 < 0.05, reject H 0 .

3. (a) H 0 :   2,000 ; H1 :   2,000

Since –1.1103 > –1.796, do not reject H 0 .
It has to be assumed that the corresponding claim amount is normally distributed.
(b) For t = –1.1103, p-value > 0.1. Hence, p-value should be larger than 0.05, the level of significance and H 0
should not be rejected.

4. H 0 :   45 pounds H1 :   45 pounds
Since –2.064 < –0.46875 < 2.064, do not reject H 0 .
It has to be assumed that the weight of packages collected under the jumbo flat rate scheme is normally distributed.

5. H 0 : p  0.9 H1 : p  0.9
Since 1.1785 < 2.326, do not reject H 0 .

20
Hypothesis Testing for Two Populations and Chi-squared Test
1. A consumer testing service compared gas ovens to electric ovens by baking one type of bread in each type of oven.
The following data corresponds to baking time in minutes were obtained:

Gas oven Electric oven

nA  10 nB  12
X A  2 .1 X B  2.3
SA  0.09 SB  0.16

At the 5% significance level, should the null hypothesis of identical mean bread baking times for the two kinds of
ovens be rejected?
(Assumptions: Both populations are normally distributed with equal variances.)

2. A financial analyst is comparing the variance of maturities (in years squared) between two different classes of
industrial bonds and he believes that they are different. For a random sample of 16 AAA-rated industrial bonds, the
standard deviation of maturities (in years squared) was 12.74. For an independent random sample of 11 CCC-rated
industrial bonds, the standard deviation of maturities was 6.32. At 10% level of significance, is there any evidence to
reveal that the variance of maturities between the two classes of industrial bonds are different?

3. Peter Morgan Forex Ltd. recently conducted a job enrichment program to enhance employee motivation. To test the
effectiveness of this program, an organizational psychologist was employed to administer job motivation tests to
two groups of employees: those with 'enriched' job positions and those who have no change in their job positions. Of
the 10 selected employees tested after job enrichment, the average score on the motivation test was 28.2 with a
standard deviation of 1.32. Among the 16 employees tested who had not been affected by the job enrichment
program, the mean score on the motivation test was 27.5 with a standard deviation of 1.55. At the 0.05 level of
significance, is there sufficient evidence to reveal that the job enrichment program is effective in enhancing
employee motivation?
[Hint: First apply a test to check whether there is evidence to support that the two population variances are equal.
F0.025,15,9 = 3.769 and F0.025,9,15 = 3.123]

21
4. Mr X Fruit Juice has interviewed 6 randomly chosen customers to gauge the success of its latest advertising
campaign. The customers were asked how many cans of fruit juice they purchased per week, both before and after
the advertising campaign began. The results are given in the table below:

Before: 16 8 4 8 6 12
After: 18 8 12 4 4 16
Assuming that the population of the difference is approximately normally distributed, do these data, at the 0.05 level
of significance, indicate that the advertising campaign has been successful in increasing customers' demand for Mr
X?

5. Of a random sample of 270 Hong Kong residents, 56 of them believed that the economy of Hong Kong will become
better in the next ten years. Of an independent random sample of 203 Macau residents, 52 of them believed that the
economy of Macau will become better in the next ten years.
(a) At 5% level of significance, is it justified to claim that the proportions of all the residents of Hong Kong and
Macau, who believe that the economy of their homeland will become better in the next ten years, are equal?
(b) Use the 'p-value' approach to test the hypothesis in part (a).

22
6. Skylight Neon Company is a major supplier of neon tube produced by its two plants A and B located in Shenzhen
and Shatin respectively. Knowing that the production processes can be assumed to be independent between plant A
and plant B, the production manager wants to determine if the proportions of defective tubes produced by plant A
and plant B are different. Among 800 randomly selected tubes produced by plant A, 40 were defective. Among 650
randomly selected tubes produced by plant B, 13 were defective. Perform a hypothesis test for the production
manager at 1% level of significance.
(a) using the Normal Approximation.
(b) using the Chi-square Test.
(c) Which of the above two tests that the production manager should use if he wants to determine whether the
proportion of defective tubes of plant A is higher than that of plant B?

7. The marketing manager of a large department store would like to know whether there are differences in the
proportion of female customers at the stores located in four different regions. A random sample of 400 customers
from Store A, 450 from Store B, 430 from Store C and 320 from Store D were selected with the following results:
Stores
Customers A B C D Totals
Male 120 113 134 108 475
Female 280 337 296 212 1125
Totals 400 450 430 320 1600
At the 0.05 level of significance, is there evidence of a difference in the proportion of female customers at the four
stores?

8. Tilton Hotel has rooms in the high, moderate, and low price levels. In order to boost sales during low season, the
management board of Tilton decided to advertise high-quality room service regardless of price levels. To test the
validity of the advertisement, a random sample of guests were selected during the low season with the following
results:
Rooms' Price Levels
Service rated
by customers High Moderate Low Totals
Excellence 24 16 15 55
Good 30 50 45 125
Poor 6 34 50 90
Totals 60 100 110 270

At the 0.01 level of significance, is there evidence of a relationship between price levels of rooms and service rated
by customers? What would be the conclusion drawn by the Tilton's management board about the validity of the
previous advertisement?

23
 Answer Key:

1. H 0 :  A  B
H 1 :  A  B
Since –3.5085 < –2.086, reject H 0 .

2. 2  2
H0 : A C
2  2
H1 :  A C
Since 4.0635 > 2.845, reject H 0 .

3. H 0 :  22   12
H1 :  22   12
Since 1.3788 < 3.769, do not reject H 0 .
H 0 : 1  2
H1 : 1  2
Since 1.1829 < 1.711, do not reject H 0 .

4. H0 : D  0
H1 :  D  0 (D = before – after)
Since –0.7559 > –2.015, do not reject H 0 .

5. (a) H 0 : p1  p 2
H1 : p1  p2
Z  –1.2502
Since –1.96 < –1.2502 < 1.96, do not reject H 0 .
a. p-value = 2(0.1056) =0.2112 > 0.05, do not reject H 0 .

6. (a) H 0 : p A  pB
H 0 : p A  pB
Since 3.0274 > 2.575, reject H 0 .
(b) H 0 : p A  pB
H 0 : p A  pB
Since 9.1652 > 6.635, reject H 0 .
(c) Normal approximation.

7. H 0 : p A  pB  pC  pD
H 1 : At least one proportion is different from the others.
 f i  ei 2
The test statistic is  2R 1C 1  
all
ei
 7.51206444
cells

 32, 0.05  7.815 , do not reject H 0 .

8. H 0 : There is no relationship between price levels of rooms and service rated by customers.
H 1 : There is a relationship between price levels of rooms and service rated by customers.
 f i  e i 2
The test statistic is  R 1C 1  
all
ei
 30 .56132233 ;  42, 0.01  13.277 , reject H 0 .
cells

24