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Questions in Statistical Techniques in Business & Economics

Multiple Choice Statistics
(Statistical Techniques in Business & Economics, 11th ed.) Lind et al.

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1. The quality management points of Deming:
a. emphasized that quality originates from improving the process, not from inspection.
b. Identified production quotas and merit systems as crucial to quality improvement.
c. Emphasized that quality depends upon making each distinct department and staff area established its own separate measure of quality.
d. Identify education and training for both workers and managers as crucial to process improvement.
e. Both a and d.
f. All of the above

2. The primary objective of statistical quality control is to eliminate all product variation.
a. True
b. False

3. An error in a training tape results in machine operators over-adjusting a tooling machine on a regular basis. The resultant unacceptable output is an example of :
a. chance variation
b. assignable variation

4. A Pareto chart:
a. employs the 80-20 rule to rank defects in the order that they should be addressed
b. tallies the number and type of defects that happen within a product or service
c. is a tool that helps to organize ideas and identify relationships.
d. is primarily used to identify potential causes of variability within a system
e. both a and b
f. all of the above

5. A (n) chart is based on actual measurements.

a. pareto
b. cause-and-effect
c. variable control
d. attribute

Answer the next four questions using the following information:
Samples of size 5 are drawn from 10 separate production runs to measure data on a product average:

Sample
RUN 1 2 3 4 5
1 59 74 53 48 65
2 42 51 70 47 67
3 52 42 53 87 85
4 35 70 62 44 79
5 34 59 39 78 61
6 66 80 54 68 52
7 74 43 45 65 49
8 75 53 68 50 31
9 48 65 70 41 52
10 43 38 10 19 47

6. This data will be mapped using a(n):
A. attribute control chart
B. range chart
C. mean chart
D. percent defective chart

7. The lower control limit for the chart is:

a. 19.64
b. 34.66
c. 50.88
d. 54.56

8. The data indicates that the machine is in statistical control.
a. True
b. False

9. A range chart for the data presented for questions 6 - 9 will have upper and lower limits of:
a. 20.48; 0.00
b. 50.52; 20.48
c. 75.08; 0.00
d. 75.08; -20.04

10. Answer questions 10-11 using the following information:

20 samples of fifty pipe rivets each were drawn from a production line. The number of defective items per sample was as follows: 1, 2, 5, 2, 0, 2, 1, 1, 0, 1, 0, 1, 1, 0, 5, 0, 0, 6, 3, 1

For this data set, p =
a. 0.0128
b. 0.02
c. 0.031
d. 0.032
e. 0.64

11. The upper and lower control limits are, respectively,:

a. 0.1045 and -0.0425
b. 0.1045 and 0.00
c. 0.0735 and 0.02
d. 0.1067 and 0.00

12. A chart which illustrates weak areas in a construction process is termed a (n):
a. mean chart
b. range chart
c. percent defective chart
d. c-bar chart

13. If the item recorded is a fraction of unacceptable parts made in a batch of larger parts, the appropriate control chart is the:

a. mean chart
b. range chart
c. percent defective chart
d. c-bar chart

14. Acceptance sampling:

a. is often employed because 100% inspection is rarely feasible.
b. Screens out lots of incoming products that are unacceptable
c. Will accept an incoming lot is n > c.
d. Is subject to alpha error whereby a lot with an above normal number of defects is accepted when it should be rejected.
e. Both a and b
f. All of the above

15. An inspector determined that 0.05% of a lot of 400 items are defective. The actual number of defective items is 6. The critical number is 4. This is an example of:

a. faulty sampling
b. a type II error
c. producer's risk
d. consumer's risk

16. The probability that a firm accepts a lot which is 20% defective using a sample size of 14 and an acceptance number of 3 is:

a. 0.044
b. 0.956
c. 0.842
d. 0.698

17. A firm has sales in consecutive years as follows: Year 1: $500,000; Yr 2: $400,000; Yr 3: 450,000; Yr 4: $600,000; Yr 5: $580,000. Using year 1 as a base year, which of the following statements is true?

a. the index number for year #3 is 90
b. the index number for year #4 is 133.33
c. sales for year 5 are 45% above the sales level in the base year.
d. Year #2 sales are 80% of the base year level.
e. Both a and d.
f. All of the above

18. The index that measures price changes in domestic output for a number of industries is called:
a. The consumer price index
b. The industrial production index
c. The producer price index
d. An economic index

19. Use the following information, and 2000 as a base year, to answer questions 19-21:

Price Per Unit Quantity
Item 2000 2001 2000 2001
A 1.00 1.10 2 4
B 5.50 6.00 2 3

An unweighted, unaggregated price index would give a value of:
a. 91
b. 100
c. 109
d. 119

20. A laspeyres price index would give a value of:
a. 69.3
b. 101.4
c. 109.2
d. 169.3

21. A paasche price index yields a value of:
a. 89.2
b. 109.2
c. 119.6
d. 172.3

22. The Paasche index is a weighted aggregate price index that uses weights based on:
a. base period quantities
b. the ratio of base period quantities to current period quantities
c. current period quantities
d. the ratio of base period prices to current period prices

23. The Paasche price index assumes that the quantities of products used or consumed do not change between the base period and the current period.
a. True
b. False

Answer question 24-28 based on the following information:
The following data was gathered for domestic consumption (C, in millions of tons) and price per unit (P) of basis foodstuffs (base year is 2001):

2001 2002 2003
Type P C P C P C
Wheat 2 10 3 11 5 14
Barley 3 7 2 10 3 12
Corn 1 12 1 13 2 14

24. The Laspeyres price index for 2002 is:
a. 105.66
b. 124.53
c. 179.24
d. 253.83

25. The Laspeyres price index for 2003 is:

a. 105.66
b. 120.00
c. 141.17
d. 179.24

26. The Paasche price index for 2002 is:
a. 101.54
b. 116.07
c. 120.00
d. 124.53

27. The Paasche price index for 2003 is:

a. 141.05
b. 171.79
c. 179.24
d. 252.83

28. A value index for the information would be:
a. 147.17
b. 174.26
c. 179.4
d. 252.83

29. The consumer price index:

a. may be used to determine real disposable personal income levels.
b. Is an indicator of the rate of inflation in the economy.
c. Illustrates the extent to which purchasing power has been eroded since the base year.
d. Requires changes in the base period to reflect changes in consumption patterns.
e. Both b and c.
f. All of the above

30. GNP in country X for 2002 is $800 billion. If the consumer price index is currently 125, real GNP, in billions, for 2002 was:

a. $675
b. $640
c. $925
d. $1000

31. The GNP is country Y in 2002 was $340 billion, if real GNP was 425, the price deflator for 2002 is:
a. 42.5
b. 80
c. 100
d. 125

32. The time series component that concerns itself with conditions in the economy is:
a. secular variation
b. cyclical variation
c. seasonal variation
d. irregular variation

33. __________variations are fluctuations that are unpredictable and cannot be identified.
a. Seasonal
b. Irregular
c. Episodic
d. Residual

34. Sales (in millions) for a software manufacturing firm are as follow: 1991: 120; 1992: 150; 1993: 140; 1994: 150; 1995: 158.

The least squares trend line for the data is:
a. Y1 = 64 + 4t
b. Y1 = 146.29 - 1.14t
c. Y1 = 120.8 + 7.6t
d. Y1 = 132 + 6t

35. The seasonal index is used:
a. for data with large annual swings in values
b. to determine a set of "typical" seasonal objectives
c. to eliminate irregular variation and develop a time series from seasonal, trend and cyclical components only.
d. To deseasonalize data in order to develop a smooth picture of the value under consideration.
e. Both a and c.
f. All of the above

36. Raw values are divided by centered moving average and multiplied by 100 in order to determine:
a. the four-quarter moving average
b. a constant value index
c. the quarter moving total
d. the specific seasonal index
e. a moving average

37. Use the following information to answer questions 37 - 38:
A firm develops a trend equation for quarterly sales based on an analysis of data for the previous 8 years. The trend equation is determined to be: Y1 = 3.7 + 0.68t.

The projected sales for the second quarter of the current year is:
a. 5.06
b. 25.46
c. 26.82
d. 53.7

38. If the seasonal index for the second quarter is 92, the seasonally adjusted sales forecast is:
a. 4.65
b. 24.67
c. 29.15
d. 49.40

39. An index is a convenient way of expressing changes in a heterogeneous group of items.
a. True
b. False

40. Irregular fluctuations in time-series data are flattened by exponential smoothing in order to develop accurate statistical forecasts.
a. True
b. False

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Solution Summary

The solution gives answers to 40 multiple choice questions from Statistical Techinques in Business & Economics (Statistical Techinques in Business & Economics, 11th ed.) Lind et al. The questions are related to quality control, index numbers, time series analysis.

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