Econ 506, Section M1
NAME:_
SOLUTION_
_____
Quiz 2A, Sept. 30, 2010
Total points: 50
I.
(8 points)
Suppose an economist is organizing a survey of American minimum wage
workers, and is interested in understanding how many workers that earn the minimum
wage are teenagers.' Suppose further that one out of every four minimum wage workers is
a teenager. If the economist finds 10 minimum wage workers for his survey, what's the
probability that he interviews at least one teenager?
Assume Y = # of teenagers in 10 selection. Then Y has Binomial distribution with p
=
.
25, n
=
10.
943686485
.
0
056313515
.
0
1
)
1
(
0
10
1
)
0
(
1
)
1
(
0
10
0
=

=


=
=

=
≥

p
p
Y
P
Y
P
II. (10 points)
accident records collected by an automobile insurance company give the
following information. The probability that an insured driver has automobile accidents is
0.15. If an accident has occurred, the damage to the vehicle amounts to 20% of its market
value with a probability of 0.8, to 60% of its market value with a probability of 0.12, and
to a total loss with a probability of 0.08. What premium should the company charge on a
This preview has intentionally blurred sections. Sign up to view the full version.
View Full Document
This is the end of the preview.
Sign up
to
access the rest of the document.
 Fall '08
 Staff
 Normal Distribution, Probability theory, insurance company, Cumulative distribution function, Minimum Wage Workers

Click to edit the document details