38. The Board of Directors of Bidwell Valve Company has made the following estimates for the upcoming
year’s annual earnings:
P(earnings lower than this year) = .30
P(earnings about the same as this year) = .50
P(earnings higher than this year) = .20
After talking with union leaders, the human resource department has drawn the following conclusions:
P(Union will request wage increase | lower earnings next year) = .25
P(Union will request wage increase | same earnings next year) = .40
P(Union will request wage increase | higher earnings next year) = .90
a. Calculate the probability that the company earns the same as this year and the union requests a
wage increase.
b. Calculate the probability that the company has higher earnings next year and the union does not
request a wage increase.
c. Calculate the probability that the union requests a wage increase.
39. An accounting firm has noticed that of the companies it audits, 85% show no inventory shortages, 10%
show small inventory shortages and 5% show large inventory shortages. The firm has devised a new
accounting test for which it believes the following probabilities hold:
P(company will pass test | no shortage) = .90
P(company will pass test | small shortage) = .50
P(company will pass test | large shortage) = .20
a. If a company being audited fails this test, what is the probability of a large or small inventory
shortage?
b. If a company being audited passes this test, what is the probability of no inventory shortage?
40. Global Airlines operates two types of jet planes: jumbo and ordinary. On jumbo jets, 25% of the
passengers are on business while on ordinary jets 30% of the passengers are on business. Of Global’s
air fleet, 40% of its capacity is provided on jumbo jets. (Hint: you have been given two conditional
probabilities.)
a. What is the probability a randomly chosen business customer flying with Global is on a jumbo jet?
b. What is the probability a randomly chosen non-business customer flying with Global is on an
ordinary jet?
41. Safety Insurance Company has compiled the following statistics. For any one-year period:
P(accident | male driver under 25) = .22