Chapter 8.4, Problem 8.29E

According to the American Management Association, most U.S. companies now test at least some employees and job applicants for drug use. The U.S. National Institute on Drug Abuse claims that about 15% of people in the 18-25 age bracket use illegal drugs. Allyn Clark, a 21 year-old college graduate, applied for a job at the Acton Paper Company, took a drug test, and was not offered a job. He suspected that he might have failed the drug test, even though he does not use drugs. In checking with the company's personnel department, he found that the drug test has 99% sensitivity, which means that only 1% of drug users incorrectly test negative. Also, the test has 98% specificity, meaning that only 2% of nonusers are incorrectly identified as drug users. Allyn felt relieved by these figures because he believed that they reflected a very reliable test that usually provides good results. But is this really true? The accompanying table shows data for Allyn and 1,499 other job applicants. Based…

In a small Vermont town of 5,000 adults, 2,000 live in private homes while the remaining live in apartment buildings. Of those living in private homes, 240 are upper income, 1,200 are middle income and 560 are lower income. Of those living in apartment buildings, 900 are upper income, 600 are middle income, and 1,500 are lower income. The town council is interested in making a policy change to restructure the property tax base in the town and needs to make an informed decision based on demographic trends and real data. Set up a cross-classification table for type of dwelling unit and income status and find the probability that a person chosen at random: a. Is middle incomeb. Lives in an apartment buildingc. Lives in a private home and is upper incomed. Lives in an apartment building or is lower incomee. Is middle income, if it is known that he lives in an apartment building

Sharp Outfits is trying to decide whether to ship some customer orders now via UPS or wait until after the threat of another UPS strike is over. If Sharp Outfits decides to ship the requested merchandise now andthe UPS strike takes place, the company will incur $60,000 in delay and shipping costs. If Sharp Outfits decides to ship the customer orders via UPS and no strike occurs, the company will incur $4000 in ship-ping costs. If Sharp Outfits decides to postpone shipping its customer orders via UPS, the company will incur $10,000 in delay costs regardless of whether UPS goes on strike. Let p represent the probabilitythat UPS will go on strike and impact Sharp Outfits’s shipments.a. For which values of p, if any, does Sharp Outfits minimize its expected total cost by choosing to postpone shipping its customer orders via UPS? b. Suppose now that, at a cost of $1000, Sharp Outfits can purchase information regarding the likelihood of a UPS strike in the near future. Based on similar…