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In: Economics

1. Profits  of  an  industry  consisting  of  100  firms  are  normally  distributed  with  a  mean of  $1.5 &n

1. Profits  of  an  industry  consisting  of  100  firms  are  normally  distributed  with  a  mean

of  $1.5  million  and  a  standard  deviation  of  $120,000.  Calculate:

(a)  (5  points)  P (X  < $1  million)

Now  suppose  a  random  sample  of  10  firms  gave  a  mean  profit  of  $900,000  and  a  sample standard  deviation  of  of  $100,000.

(b) Establish  a  95%  confidence  interval  for  the  true  mean  profit  for  the  industry.

(c) Using  the  test  of  significance  approach,  will  you  reject  or  fail  to  reject  the  hypothesis  that  the  true  mean  is  $1.5  million?  Please  show  your  work.

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