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04 STAT probability theory IC Q2 two markets

# 04 STAT probability theory IC Q2 two markets - is.5 Also...

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Dr. V.R. Bencivenga Economic Statistics Economics 329 PROBABILITY INDEX CARD QUESTION TWO MARKETS 1. A firm plans to enter two markets . In each market, the level of demand may be either high or low; also, the level of fixed costs may be either high or low. (High demand means sales are high; high fixed costs might be due to insurance rates or the energy costs of cooling the store something that does not affect unit variable costs.) Entering these two markets may be viewed as an experiment. a. Give the sample space generated by this experiment. b. Let event A be “demand is high in both markets.” Which basic outcomes are in A? c. Let event B be “fixed costs are low in both markets.” Which basic outcomes are in B? d. What is B A ? What is B A ?

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e. In each market, the probability of high demand is .6, and the probability of high fixed costs
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Unformatted text preview: is .5. Also, the probability that both fixed costs and demand will be high is .4. The probability that both fixed costs and demand will be high in both markets is .35. The probability that both fixed costs and demand will be low in both markets is .25. The probability that fixed costs will be low and demand will be high in both markets is .125. The probability is zero that fixed costs and demand will both be high in one market, and both be low in the other market. The remaining probability is evenly distributed over the remaining basic outcomes. Give the probability distribution over the sample space. f. Are the two markets statistically independent? Explain why or why not. g. What is P(A)? What is P(B)?...
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