Review Problems Set 1 A) Probability 1.

. From a well-shuffled set of 52 playing cards what is the probability of getting a hand of 2 spades, 3 hearts and 3 diamonds? Solution: A hand is a collection of 13 cards from the 52 cards in a deck, and this can be drawn in 52C13 ways. Since there are 13 cards for each of the four suits, to get a hand of 2 spades, 3 hearts, 3 diamonds (and remaining 5 all clubs), this can happen in 13C2 * 13C3 * 13 C3 * 13C5 ways. The required probability is, therefore, 13 C2 * 13C3 * 13C3 * 13C5 / 52C13 . 2. What is the probability of throwing 7, 8 or 10 with 2 dice? Solution: With 2 dice, there are 6*6 = 36 possible cases, of which cases favourable to the total being 7, 8 or 10 are (1,6), (2,5), (3,4), (4,3), (5,2), (6,1), (2,6), (3,5), (4,4), (5,3), (6,2), (4,6), (5,5) and (6,4), i.e., a total of 14 cases. The required probability is, therefore, 14/36 = 7/18. 3. If a boy is pelting stones at a target and if the probability of a hit is 0.3, what is the probability that (a) he will hit exactly 3 times in 10 trials, (b) fourth hit comes in the eighth trial? Solution: Call p = P(hitting the target in an attempt) = 0.3. Then P(not hitting the target in an attempt) = 1 0.3 = 0.7. a) P(hitting exactly 3 times in 10 trials)

Suppose the first 3 trials are hits, rests are all failures. Since the events are independent, this probability is 0.3*0.3*0.3*0.7*0.7*0.7 = 0.33*0.77. This is same as the probability for 3 hits in any three trials (not necessarily the first three) and failures in the other trials. Since 3 trials can be chosen from 10 trials in 10C3 ways, the required probability is 10 C3 0.33*0.77 . b) P(fourth hit comes in the eighth trial) = P(there are 3 hits among the first 7 trials, and the eighth trial is a hit) = P(there are 3 hits among the first 7 trials)*P(the eighth trial is a hit) = 7C3 0.33*0.74*0.3 = 7C3 0.34*0.74

4. Three machines X, Y and Z of equal capacities are producing a machine part. The probabilities that the machines produce defectives (parts which do not meet quality specifications) are 0.1, 0.2 and 0.1 respectively. An item is taken at random from the production process.

(a) What is the probability that it is defective? (b) If the item inspected is found to be defective, what is the probability that it came from machine X? Solution: Define B1, B2 and B3 as events that the item drawn from the production process comes from machines X, Y and Z respectively. Sine the machines are of equal capacities and the item has been drawn at random, we have, P(B1) = P(B2) = P(B3) = 1/3 Define the event A = the item drawn is defective. From the information given, we get P(A|B1) = 0.1, P(A|B2) = 0.2 and P(A|B3) = 0.1. a) Since B1, B2 and B3 form a partition of the sample space, P(A) = P(B1).P(A|B1) + P(B2).P(A|B2) + P(B3).P(A|B3) = 0.4/3 = 2/15 b) Required Probability = P(B1|A) = P(B1).P(A|B1) / P(A) = = 0.25 B) Distribution Theory 5. If a person gets Rs. (2x+5) where x denotes the number appearing when a balanced die is rolled once, how much money can he expect per game in the long run? Solution: Probability of getting number x is 1/6 for x = 1, 2, , 6, and corresponding pay-offs are 7, 9, 11, 13, 15 and 17. Thus expected pay-off = (1/6)*7 + (1/6)*9 + + (1/6)*17 = 72/6 = 12 (Rs.) 6. A shopkeeper has the facility to store a large number of a perishable item. He buys it at Rs. 30 per item and sells at Rs. 50. Any item left unsold at the end of the day is a total loss. The probability distribution of the daily demand of the item, X, is given by: P(X=4) = 0.2, P(X=5) = 0.5 and P(X=6) = 0.3. How many items should he store such that his profit is a maximum? Solution: Suppose the optimal number of items that should be stored is c. The profit function is given as P = 20X 30(c X) = 50X 30c if X < c, and = 20c if X c. Then expected profit = E(P) = Sum (profit*probability) If c = 4 then profit values are 80, 80 and 80 according as X = 4, X= 5 and X = 6. Thus E(P) = 80*0.2 + 80*0.5 + 80*0.3 = 80 If c = 5 then profit values are 50, 100 and 100 according as X = 4, X = 5 and X = 6. Thus E(P) = 50*0.2 + 100*0.5 + 100*0.3 = 90 If c = 6 then profit values are 20, 70 and 120 according as X = 4, X = 5 and X = 6. Thus E(P) = 20*0.2 + 70*0.5 + 120*0.3 = 75

Since the expected profit attains a maximum 90 for c = 5, the required number of items to be stored for maximizing the profit is 5. C) Utility Theory and Decision Making 7. A patented mass communication technology rests with the state run Telecommunication Company. The company can market it on its own, and it will bring a profit of 20,000 million rupees if the output of marketing is good. If the output of marketing is bad, the company will suffer a loss of 2000 million rupees. It is estimated that the probability of a good marketing output is 0.6. An offer came from a foreign multinational to purchase the patented communication technology at a price of 10,000 million rupees. Should the company accept the offer a) if it wants to maximize its expected profit, b) if the company is not sure of its ability to market the product (pessimist), c) if the company is confident about its ability (optimist), d) if nothing is known about the chances of marketing output, what should be the chance of accepting the offer if the company wants to have the same expected profit? Solution: a) Expected profit for own venture = 20,000*0.6 + (- 2,000)*0.4 = 11,200 (Rs. Million) Expected profit if offer accepted = 10,000 (Rs. Million) Do not accept the offer. b) Expect the worst a loss of 2000. Accept the offer. c) Expect the best a profit of 20,000. Do not accept the offer. d) Accept the offer with probability p and reject it with probability (1 p). Expected profit under good marketing output = 10,000*p + 20,000*(1 p) = 20,000 10,000p Expected profit under bad marketing output = 10,000*p + (- 2,000)*(1 p) = 12,000p 2,000 p should be such that these two expected profits are same. 20,000 10,000p = 12,000p 2,000 i.e., 22,000p = 22,000 or p =1 Accept the offer.

Some Practice Problems 1. A four-digit number is formed with the numbers 1, 2, 3 and 4, no repetitions being allowed. What is the probability that the number formed is i) odd, ii) divisible by 4?

2. A standard technique used in estimation of the size of a live population is the catch-recatch method, where some members are drawn, tagged and returned to the population. A second sample is later drawn and the number of tagged units in the sample is counted. A pond has 2000 red and 5000 golden fish, of which 100 and 300 respectively are tagged. What is the probability that a random sample of 50 red and 100 golden fish will show 10 and 20 tagged fish respectively ?

3. A box of 30 electric bulbs contains 5 defectives. A random sample of 3 bulbs is selected from this box. If X denotes the number of defective bulbs in the sample, find i) the probability distribution of X, ii) the mean and variance of X.

4. A catering company prepares lunch boxes for the spectators of a one-day cricket game. It costs Rs. 20 to make a box and they can sell it for Rs. 50. A box left unsold during the lunch interval is a complete loss. The number of spectators, X, expressed in thousands, has the following probability distribution: P(X = 1) = 0.2, P(X = 1.5) = 0.4, P(X = 2.0) = 0.3 and P( X = 2.5) = 0.1. How many boxes should the company make if it wants to maximize the expected profit ?

5. A business house is faced with a certain dilemma. In the ensuing national election, there are three political parties, and according to a market survey the respective chances of winning are 0.50 (party 1), 0.35 (party 2) and 0.15 (party 3). If party 1 is supported and it wins the election, the business house expects to make a profit of 2 million rupees; but it can lose 1 million and 0.5 million rupees if party 2 or 3 wins respectively. If party 2 is supported and party 2 wins he can make 2.5 millions but will lose 1.5 million or 0.95 million if party 1 or party 3 wins. If party 3 is supported and it wins the election, the profit is 5 millions but will lose 2 million or 2.5 million if party 1 or party 2 wins. a) Which party should the house support if it wants to make a good profit? b) Suppose the result of the survey is not available to the business house and from past experiences it considers party 1 and party 2 to be the only two parties with reasonable chances of forming the next government. With what probability should the house support party 1 if it wants the profit to be the same, regardless of who wins the election?