APPENDIX A
PROBABILITY CONCEPTS AND APPLICATIONS
SOLUTIONS TO DISCUSSION QUESTIONS
A-1. There are two basic laws of probability. First, the probability of any event or state of nature
A-2. Events are mutually exclusive if only one of the events can occur on any one trial. Events are
collectively exhaustive if the list of outcomes includes every possible outcome. An example of mutually
A-3. Probability values can be determined both objectively and subjectively. When determining
A-4. The probability of the intersection of two events is subtracted in summing the probability of the two
A-5. When events are dependent, the occurrence of one event does have an effect on the probability of the
occurrence of the other event. When the events are independent, on the other hand, the occurrence of one
A-6. Bayes’ theorem is a probability relationship that allows new information to be incorporated with
A-7. Probability revisions, using Bayes’ theorem, can be useful in terms of managerial decision-making.
For example, Bayes’ theorem can be used to incorporate the results of a marketing survey into existing
A-8. A random variable is a function defined over a sample space. There are two types of random
A-9. A probability distribution is a statement of a probability function that assigns all the probabilities
A-11. The variance is a measure of the dispersion of the distribution. The variance of a discrete
probability distribution is computed by the formula V = Σ[X – E(X)]2 P(X).
A-12. The purpose of this question is to have students name three business processes they know that can
A-13. This is an example of a discrete probability distribution. It was most likely computed using