04 STAT probability theory IC Q3 Q4 Q5 Bayes Rule

# 04 STAT probability theory IC Q3 Q4 Q5 Bayes Rule - Dr....

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Dr. V.R. Bencivenga Economic Statistics Economics 329 PROBABILITY—INDEX CARD QUESTIONS THREE BAYES RULE PROBLEMS 1. A man was struck by a speeding taxi as he crossed the street. An eyewitness testified the taxi (which did not stop) was blue. The man sued the Blue Cab company for his medical expenses. The city has only two cab companies, Blue Cab and Green Cab. Green Cab has 85% of all taxis in the city. At the trial, the man’s lawyer showed that the eyewitness is 80% reliable in identifying the color of taxis. That is, the eyewitness was able to identify the color of a taxi correctly 80% of the time, under conditions similar to those the night of the accident. The lawyer concludes that it is extremely likely that the man was hit by a Blue Cab taxi. Given the eyewitness’s testimony, what is the probability the man was hit by a Blue Cab taxi?

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2 2. An investor is unsure whether interest rates will increase (I), remain the same (S), or decrease (D) by mid-summer.
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## This note was uploaded on 02/26/2012 for the course ECONOMICS 329 taught by Professor Bencivenga during the Spring '12 term at University of Texas.

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04 STAT probability theory IC Q3 Q4 Q5 Bayes Rule - Dr....

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