Applied Business Statistics
Practice Questions
Course Introduction
Applied Business Statistics equips students with the statistical tools and analytical techniques essential for informed decision-making in business environments. The course covers topics such as data collection, descriptive statistics, probability distributions, sampling methods, hypothesis testing, regression analysis, and the interpretation of statistical results. Emphasis is placed on applying these concepts to real-world business scenarios, using software tools to analyze data, and communicating findings effectively to support strategic business goals. Students will develop critical thinking skills and gain practical experience in using statistics to solve complex business problems.
Recommended Textbook
Statistical Techniques in Business and Economics 16th Edition by Douglas Lind
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Page 2
Chapter 1: What Is Statistics
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Sample Questions
Q1) When we make an estimate or prediction, we use _______________.
Answer: inferential statistics
Q2) What level of measurement is a person's "favorite sport"?
A) Ratio
B) Ordinal
C) Interval
D) Nominal
Answer: D
Q3) The final rankings of the top 20 NCAA college basketball teams are an example of which level of measurement?
A) Nominal
B) Ordinal
C) Interval
D) Ratio
Answer: B
Q4) The science of collecting, organizing, presenting, analyzing, and interpreting data is called __________________.
Answer: statistics
Q5) The monthly consumer price index is called a(n) ______________.
Answer: statistic
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Chapter 2: Describing Data: Frequency Tables, Frequency
Distributions, and Graphic Presentation
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Q1) A student was studying the political party preferences of a university's student population. The survey instrument asked students to identify their political preference, for example, Democrat, Republican, Libertarian, or another party. The best way to illustrate the frequencies for each political preference is a __________.
A) Bar chart
B) Box plot
C) Histogram
D) Frequency polygon
Answer: A
Q2) A _____ chart is useful for displaying a frequency distribution for a qualitative variable.
Answer: bar
Q3) In order to convert class frequency to relative class frequency, we
A) divide the midpoint of the class by the sample size.
B) divide the frequency of the class by the midpoint.
C) divide the sample size by the frequency of the class.
D) divide the frequency of the class by the sample size.
Answer: D
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Chapter 3: Describing Data: Numerical Measures
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Sample Questions
Q1) A sample of single persons receiving Social Security payments revealed these monthly benefits: $826, $699, $1,087, $880, $839, and $965. How many observations are below the median?
A) 1
B) 2
C) 3
D) 3.5
Answer: C
Q2) The distribution of annual salaries for 52 employees in a small manufacturing company has the following averages: the mean is $25,459, the median is $24,798 and the mode is $24,000. What is the total amount paid for employee salaries?
Answer: $1,323,868
Explanation: The mean is found by totaling the salaries and dividing by 52. But if we know the mean and the number of observations, we can determine the total. It is found by multiplying 52 (the number of employees) by the mean ($25,459). So the total salary is 52 × $25,459 = $1,323,868.
Q3) A geometric mean is useful to compute the average percent change over _______.
Answer: time
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Chapter 4: Describing Data: Displaying and Exploring Data
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Sample Questions
Q1) A ___________ is the best way to display the relationship between two variables measured on an interval or ratio level.
Q2) The following stem-and-leaf display reports the number of boats shipped per week by Ottertail Boats, Inc.
11| 1 5 9
List the actual values in the fourth class.
Q3) Quartiles divide a frequency distribution into _______ equal parts.
Q4) In a distribution, the second quartile corresponds with the __________. A) Mean
B) Median C) Mode
D) Variance
Q5) A ___________ uses dots to show frequencies.
Q6) The interquartile range is the distance between ___________.
Q7) What is the common purpose of a dot plot and a box plot?
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Chapter 5: A Survey of Probability Concepts
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Q1) A collection of one or more possible outcomes of an experiment is called a(n)
Q2) A sales representative calls on four hospitals in Westchester County. It is immaterial what order he calls on them. How many ways can he organize his calls?
A) 4
B) 24
C) 120
D) 37
Q3) When the special rule of multiplication is used, the events must be
Q4) A tire manufacturer advertises, "the median life of our new all-season radial tire is 50,000 miles. An immediate adjustment will be made on any tire that does not last 50,000 miles." You purchased four of these tires. What is the probability that all four tires will wear out before traveling 50,000 miles?
A) 1/10 or 0.10
B) ¼ or 0.25
C) 1/64 or 0.0156
D) 1/16 or 0.0625
Q5) When the special rule of addition is used, the events must be _______________.
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Chapter 6: Discrete Probability Distributions
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Sample Questions
Q1) The random variable for a Poisson probability distribution can assume an infinite number of values.
A)True B)False
Q2) David's gasoline station offers 4 cents off per gallon if the customer pays in cash and does not use a credit card. Past evidence indicates that 40% of all customers pay in cash. During a one-hour period, 15 customers buy gasoline at this station. What is the probability that all 15 pay in cash?
A) 0.0
B) 0.1
C) 0.9
D) 1.0
Q3) If n = 900 and = , the variance of this binomial distribution is ______.
Q4) A continuous random variable can assume one of a(n) ____________ number of values within a specific range.
Q5) For any probability distribution, the mean is calculated as a weighted mean. The weights are the ______________.
Q6) If = 1/3 and n = 900, the mean of this binomial distribution is ______.
Q7) The mean of a Poisson distribution is calculated using ____.
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Chapter 7: Continuous Probability Distributions
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Q1) To apply the normal approximation to a binomial distribution, mean, and variance are ________.
Q2) The center of a normal probability distribution is ________. A) the same as the standard deviation or the distribution B) never negative
C) the mean of the distribution D) always equal to zero
Q3) A major credit card company has determined that customers charge between $100 and $1,100 per month. If the average monthly amount charged is uniformly distributed, the percent of monthly changes between $311 and $889 is _______.
Q4) The weekly incomes of a large group of executives are normally distributed with a mean of $2,000 and a standard deviation of $100. What is the z-score for an income of $2,100?
A) 1.00
B) 2.00
C) 1.683
D) -0.90
Q5) The proportion of the area under a normal curve that is to the left of z = 0.50 is _______.
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Chapter 8: Sampling Methods and the Central Limit
Theorem
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Sample Questions
Q1) Bones Brothers & Associates prepare individual tax returns. Over prior years, Bones Brothers has maintained careful records regarding the time to prepare a return. The mean time to prepare a return is 90 minutes and the standard deviation of this distribution is 14 minutes. Suppose 100 returns from this year are selected and analyzed regarding the preparation time. What is the standard error of the mean?
A) 14 minutes
B) 140 minutes
C) 1.4 minutes
D) 90 minutes
Q2) Sampling a population is often necessary because the cost of studying all the items in the population is prohibitive.
A)True
B)False
Q3) If the size of a sample equals the size of the population, we would not expect any error in estimating the population parameter.
A)True
B)False
Q4) A population consists of 14 values. How many samples of size five are possible?
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Chapter 9: Estimation and Confidence Intervals
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Sample Questions
Q1) There are 250 computer programmers employed at Computers.com, Inc. A sample of 50 programmers revealed that 30 graduated with a four-year college degree. Construct the 95 percent confidence interval for the proportion of all programmers who graduated from a four-year university.
Q2) When estimating a population mean with a confidence interval, a smaller margin of error requires a _________ sample size.
Q3) Sugar is packaged in 16-ounce bags. To test the weight of the bags, a few were checked. The mean weight was 15.95 ounces and the standard deviation was 0.5 ounces. How many bags must the processor sample to be 99% confident that the sample mean does not differ from the population mean by more than 0.2 ounces?
Q4) A sample of 50 is selected from a known population of 250 elements. The population standard deviation is 15. Using the finite correction factor, what is the standard error of the sample means?
A) 2.89
B) 1.90
C) 2.12
D) Cannot be determined
Q5) Explain the concept of a confidence interval when estimating a population mean.
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Chapter 10: One-Sample Tests of Hypothesis
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Sample Questions
Q1) A manufacturer wants to increase the shelf life of a line of cake mixes. Past records indicate that the average shelf life of the mix is 216 days. After a revised mix has been developed, a sample of nine boxes of cake mix had a mean of 217.222 days and a standard deviation of 1.2019 days. At the 0.025 significance level, decide if the sample data support the claim that shelf life has increased. State your decision in terms of the null hypothesis.
Q2) Hypothesis testing is a procedure that uses sample evidence and probability theory to decide whether to reject or fail to reject a hypothesis. A)True
B)False
Q3) The waiting time for patients at a local walk-in health clinic follows a normal distribution with a mean of 15 minutes and a population standard deviation of 5 minutes. The clinic wants to know if the waiting time is less than 15 minutes. The quality-assurance department sampled 50 patients and found that the mean waiting time was 14.25 minutes. For a significance level of 0.05, what is the critical value?
Q4) A(n) ____________ hypothesis test is indicated if the alternate hypothesis states a direction.
Q5) A test statistic is computed using ________________ information.
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Chapter 11: Two-Sample Tests of Hypothesis
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Sample Questions
Q1) A financial planner wants to compare the yield of income and growth mutual funds. Fifty thousand dollars is invested in each of a sample of 35 income and 40 growth funds. The mean increase for a two-year period for the income funds is $900. For the growth funds, the mean increase is $875. Income funds have a sample standard deviation of $35; growth funds have a sample standard deviation of $45. Assume that the population standard deviations are equal. At the 0.05 significance level, is there a difference in the mean yields of the two funds? What decision is made about the null hypothesis using an = 0.05?
Q2) Assuming the population variances are known, the population variance of the difference between two means is _____________.
A) The sum of the two means
B) The sum of the two population variances
C) The sum of the two population standard deviations
D) The sum of the two sample sizes for each population
Q3) For hypotheses that compare two population means, when is a pooled variance used?
Q4) If we are testing for the difference between two population means and assume that the two populations have equal but unknown standard deviations, then the test has ________ degrees of freedom.
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Chapter 12: Analysis of Variance
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Sample Questions
Q1) Interaction between two factors occurs when the effect of one factor on the response variable is the same for any value of another factor.
A)True
B)False
Q2) When a blocking effect is included in an ANOVA, the analysis is more likely to detect differences in the treatment means.
A)True
B)False
Q3) When testing a hypothesis regarding the equality of two population means, what is the analogy to a blocking variable?
Q4) In a one-way ANOVA, ______ degrees of freedom are associated with the numerator of the F ratio.
Q5) An F statistic is __________.
A) A ratio of two means
B) A ratio of two variances
C) The difference between three means
D) A population parameter
Q6) The shape of the F distribution is _____________________.
Q7) ANOVA requires that the populations should be ______, ______, and have _____.
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Chapter 13: Correlation and Linear Regression
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Sample Questions
Q1) In the regression equation, what does the letter "a" represent?
A) The Y-intercept
B) The slope of the line
C) Any value of the independent variable that is selected
D) An error
Q2) The relationship between interest rates as a percent (X) and housing starts (Y) is given by the linear equation = 4094 - 269X. What happens to housing starts as interest rates fall?
Q3) The relationship between interest rates as a percent (X) and housing starts (Y) is given by the linear equation = 4094 - 269X. What will be the number of housing starts if the interest rate is 8.25%?
Q4) In plotting paired data in a scatter diagram, the dependent variable is scaled on the
Q5) In regression, the difference between the confidence interval and prediction interval formulas is ________________.
A) the prediction interval is the square root of the confidence interval
B) the addition of "1" to the quantity under the radical sign
C) the prediction interval uses r<sup>2</sup> and the confidence interval uses r D) no difference.
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Chapter 14: Multiple Regression Analysis
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Sample Questions
Q1) A researcher is studying the effect of 10 different variables on a critical measure of business performance. In selecting the best set of independent variables to predict the dependent variable, the stepwise regression technique is used. How are variables selected for inclusion in the model?
A) Highest increase in the multiple R<sup>2</sup>
B) Largest p-value
C) Smallest p-value
D) Smallest regression coefficient
Q2) In multiple regression analysis, residuals (Y - ) are used to _____________.
A) Provide a global test of a multiple regression model
B) Evaluate multicollinearity
C) Evaluate homoscedasticity
D) Compare two regression coefficients
Q3) Which statistic is used to test a global hypothesis about a multiple regression equation?
A) t-statistic
B) z-statistic
C) <sup>2</sup>(chi-square statistic)
D) F
Q4) The stepwise regression procedure is also called ________.
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Chapter 15: Nonparametric Methods: Nominal Level
Hypothesis Tests
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Sample Questions
Q1) The chi-square statistic _______________.
A) Is greater than or equal to zero
B) Is less than or equal to zero
C) Can be any value
D) Is equal to zero
Q2) A t-statistic is useful for computing an expected normal distribution.
A)True
B)False
Q3) A committee that is studying employer-employee relations proposed that each employee would rate his or her immediate supervisor, and in turn the supervisor would rate each employee. To test if the reactions to the survey for office and plant personnel were the same, 120 office personnel and 160 plant personnel were selected at random. Seventy-eight of the office personnel and 90 of the plant personnel were in favor of the proposal. To test the hypothesis that the population proportions are equal, what is the critical value using the 0.05 level of significance?
Q4) The shape of the chi-square distribution is _________________.
Q5) To test a hypothesis to verify that an observed frequency distribution data is normally distributed, the expected frequencies are _______________ distributed.
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Chapter 16: Nonparametric Methods: Analysis of Ordinal Data
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Q1) In testing the significance of Spearman's rank-order coefficient, the null hypothesis is
Q2) For the coefficient of rank correlation, what scale is used to measure the data?
A) nominal B) ordinal C) interval
D) ratio
Q3) In a sign test, the test statistic is based on the _______________ distribution.
Q4) A Spearman rank-order correlation coefficient of _____ indicates that there is no association between the two variables.
Q5) We can apply parametric tests, such as the t test, to ordinal or ranked level of measurement.
A)True B)False
Q6) The Spearman coefficient of rank correlation requires that observations be
Q7) The sign test is an appropriate nonparametric test for dependent samples. A)True B)False
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Chapter 17: Index Numbers
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Q1) Besides measuring change in the prices of goods and services, the consumer price index has a number of other applications such as:
A) to determine real disposable personal income.
B) to deflate sales or other data series.
C) to find the purchasing power of the dollar.
D) all of these
Q2) In terms of a weighted index, what alternatives to weighting are available?
Q3) Suppose your annual 2001 salary was $40,000 and your 2006 salary was $52,000. Assume the annual CPI rose from 177.1 to 202.9 during this period of time. What was your real income in 2006?
Q4) If the Laspeyres index is 140.78 and the Paasche index is 98.01, what is Fisher's ideal index?
Q5) A major disadvantage of the unweighted price index is that ___________________________.
Q6) The Consumer Price Index (1982-84 = 100) reports a CPI in August 2010 for new and used motor vehicles as 97.620. What is the percentage change in the price of new and used motor vehicles compared to the base?
Q7) The base year for the Consumer Price Index is _______.
Q8) When the CPI determines real income it is called the ___________.
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Chapter 18: Time Series and Forecasting
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Q1) For the third quarter, the sales are 1,500 units; the seasonal index for the quarter is 1.15. What are the deseasonalized sales for the quarter?
A) 115%
B) 15%
C) 1,304
D) 1,500
Q2) For the third quarter, the sales are 1,500 units; the seasonal index for the quarter is 0.90. What are the deseasonalized sales for the quarter?
A) 0.10
B) 90
C) 1,400
D) 1,667
Q3) If four seasonal indexes are reported for a time series, data is thus reported
Q4) The range of possible values for the Durbin-Watson statistic is:
A) any value.
B) any value greater than zero.
C) any value from zero to four inclusive. D) any value less than zero.
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Chapter 19: Statistical Process Control and Quality Management
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Sample Questions
Q1) A curve that graphs the percent defective versus the probability of accepting that percent defective is referred to as:
A) a percent defective chart.
B) a range chart.
C) an operating characteristic curve or OC curve.
D) a c-bar chart.
Q2) The manager of a restaurant inspects a delivery of steaks based on the expectation that each steak weighs eight ounces. Is this an example of acceptance sampling or statistical process control? Explain why.
Q3) Random samples of four items are selected from a manufacturing process at regular intervals and a certain quality characteristic is measured. After 25 samples, X = 15,350 and R = 411.4 The measurement of quality is based on:
A) an attribute.
B) a variable.
C) a scale.
D) a chart.
Q4) Control charts can be developed for both variables and attributes.
A)True
B)False
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Chapter 20: An Introduction to Decision Theory
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Q1) Optimists advocate a maximax strategy.
A)True
B)False
Q2) The _____________________ is the difference between the expected monetary value under conditions of certainty and the expected monetary value under uncertainty.
Q3) What is the most optimistic of all possible maximin, maximax, and minimax regret strategies?
A) Minimax
B) Maximax
C) Maximin
D) Minimax regret
Q4) A state of nature is an uncertain, future event.
A)True
B)False
Q5) Maximizers advocate a maximin strategy.
A)True
B)False
Q6) The ___________ decision-making strategy maximizes the minimum gain.
Q7) The maximax strategy is an ________ strategy for decision making.
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