MATHEMATICS, PROBABILITY AND STATISTICS IN ECONOMICS

I. Matrix:
1. Find the product A . B and B . A of matrices A, B :
2. Find the inverse matrix A-1 to the matrix A :
3. Solve the equation given by the determinant :
4. Solve the matrix equations :
II. Systems of linear equations and its applications:
5. Solve the following systems of linear equations.
−𝑥 − 2𝑦 + 𝑧 = −1 𝑥 − 2𝑦 + 𝑧 + 2𝑡 = −1
a) {2𝑥 + 3𝑦 =2 b) { 𝑥 − 3𝑦 − 𝑧 + 3𝑡 = 2
𝑦 − 2𝑧 = 0 −𝑥 + 𝑦 − 3𝑧 − 𝑡 = 4
−𝑥 + 2𝑦 + 3𝑧 + 𝑡 = 0
𝑥 − 2𝑦 + 4𝑧 − 3𝑡 = 0
2𝑥 + 3𝑦 − 𝑧 + 2𝑡 = 0
c) { d) { 4𝑥 − 3𝑦 + 5𝑧 − 7𝑡 = 0
−3𝑥 − 𝑦 + 4𝑧 − 𝑡 = 0
2𝑥 + 𝑦 − 3𝑧 − 𝑡 = 0
𝑥 − 2𝑦 − 3𝑧−= 0
6. a) Given the consumption function C = 800 + 0.9Y and the investment
function I = 8000 − 800r find an equation for the IS curve (where G0 = 0)
b) Given the money supply Ms = 28 500 and the demand for money Md =
0.75Y − 1500r find an equation for the LM curve
c) Find the equilibrium values of national income, Y, and interest rate, r.
7. Suppose that the demand and supply functions are numerically as follows
𝑄𝑑1 = 10 − 2𝑃1 + 𝑃2 ; 𝑄𝑠1 = −2 + 3𝑃1 ; 𝑄𝑑2 = 15 − 𝑃1 − 𝑃2 ; 𝑄𝑠2
= −1 + 2𝑃2
Find the equilibrium price and the equilibrium quantity of the commodities
8. Given the following national income equilibrium model
𝐶 = 0,65𝑌 + 1500; 𝐺0 = 4200; 𝐼0 = 2100.
Compute the equilibrium national income and consumption
III. Applications of differentiation and antidifferentiation of the one –
variable function:
9. Suppose the relationship between the unit price p in dollars and the quantity
demanded x is given by the equation p = - 0.03x + 750, where 0 ≤ 𝑥 ≤
25,000.
a) Find the revenue function R(x)
b) Compute R’(3,000) and interpret the meaning of this result.
10. The monthly revenue R ( in dollars) of a telephone polling service is
related to the number x of completed responses by the function
 R(x) = −13450 + 60√6𝑥 2 + 20𝑥
Where 0 ≤ 𝑥 ≤ 1500. If the number of completed responses is increasing at
the rate of 10 forms per month. Find the rate at which the monthly revenue is
changing when x = 700.
11. Find an expression for the profit function given the demand function
2Q + P = 35 and the average cost function AC = (32/Q) + 5
Find the values of Q for which the firm maximizes profit?
12. Given revenue and cost functions R(x) = 50x1/2 and C(x) = x2 + 750,
where x is the number of items produced and R(x) and C(x) are in dollars,
find the following:
a) The average revenue, the average cost, and the average profit when x
items are produced
b) The rate at which average revenue is changing when 8 items are sold.
State the meaning of this value?
13. The demand equation of a good is given by P + 2Q = 20 and the total
cost function is
C = Q3 − 8Q2 + 20Q + 2
a) Find the level of output that maximizes total revenue.
b) Find the maximum profit and the value of Q at which it is achieved
14. Find the Consumer Surplus and Producer Surplus at the equilibrium point,
where the demand and supply functions of a good are given by

𝑥+8 𝑥 2 +4
D(x) = ; S(x) =
𝑥+1 20

15.Suppose the supply and the demand functions of a product are given by
𝑄𝑠 = √𝑝 − 2 − 1; 𝑄𝑑 = √43 − 𝑝 − 2.
Find the Consumer Surplus and the Producer Surplus.
IV. Applications of differentiation of the two – variable function:
16.Find the second partial derivatives of f(x,y), where f(x,y) = 𝑙𝑛√𝑥 2 + 3𝑥𝑦
A monopolistic producer of two goods, G1 and G2, has a total cost function
TC = 5Q1 + 10Q2
where Q1 and Q2 denote the quantities of G1 and G2 respectively. If P1 and P2
denote the corresponding prices then the demand equations are
P1 = 50 − Q1 − Q2, P2 = 100 − Q1 − 4Q2
a) Find the maximum profit if the firm’s total costs are fixed at $100.
b) Using the Lagrange multiplier, estimate the new optimal profit if total costs
rise to $101.
17. A firm produces two goods x and y. Due to a government quota, the firm
must produce subject to the constraint x + y = 42. The firm’s cost function is
C(x,y) = 8𝑥 2 − 𝑥𝑦 + 12𝑦 2 . Find x, y to minimize the cost.
18. A firm has the production function 𝑄 = 𝐾 0.3 𝐿0.5 , where Q is the number
of units produced, K – units of capital, L – units of labor.
a) Find the marginal productivity of capital, the marginal productivity of
labor.
b) Assuming capital rent is $6, the labor rental is $2 and the enterprise carries
out production with a fixed budget of $384. Find K and L to help businesses
achieve maximum quantity.
19. A monopolistic producer of two goods, G1 and G2, has a total cost
function
TC = 5Q1 + 10Q2
where Q1 and Q2 denote the quantities of G1 and G2 respectively. If P1 and P2
denote the corresponding prices then the demand equations are
P1 = 50 − Q1 − Q2, P2 = 100 − Q1 − 4Q2
a) Find the maximum profit if the firm’s total costs are fixed at $100.
b) Using the Lagrange multiplier, estimate the new optimal profit if total costs
rise to $101.

Find the maximum value of Q = 40K L subject to the variable cost

0,4 0,6
20.
constraint 11K+20L=6600 . Estimate the change in the optimal value of Q
if the variable cost constraint rises by one unit.
21.A consumer’s utility function is given by U(x1, x2) = 2x1 x2+ 3x1 where x1
and x2 denote the number of items of two goods G1 and G2 that are bought.
Each item costs $1 for G1 and $2 for G2. Use Lagrange multipliers to find the
maximum value of U if the consumer’s income is $83. Estimate the new
optimal utility if the consumer’s income rises by $1.
22. A firm’s production function is given by Q = 2K1/2L1/2
Unit capital and labour costs are $4 and $3 respectively. Find the values of K
and L which minimize total input costs if the firm is contracted to provide
160 units of output.

V. RANDOM VARIABLES AND PROBABILITY DISTRIBUTIONS:

Q23. X is a discrete random variable. The table below defines a probability
distribution for X

X 0 1 2 3

P 0.17 0.14 0.36 0.33

What is the expected value of X? What is the variance value of X?

Q24. The random variable X is given by the following PDF. Check that this is
a valid PDF and calculate the expected, the variance, the standard deviation
values of X.
 Q25. Let X be a continuous random variable with the following

𝑐𝑒 −𝑥 𝑖𝑓 𝑥 ≥ 0
𝑓(𝑥) = {
0 𝑜𝑡ℎ𝑒𝑟𝑤𝑖𝑠𝑒

where c is a positive constant.

a. Find c.

b. Find the cumulative distribution function of X.

c. Find P(1<X<3).

Q26. Let X be a random variable following a normal distribution

model N(10,2).

a. Calculate P(X≤10).

b. Calculate P(8≤X≤14).

Q27. Let Z be a random variable following a standard normal distribution

model. Determine the value of x in the following cases using the table of the
distribution function:

a. P(Z<x)=0.6406.

b. P(Z>x)=0.0606.

c. P(0≤Z≤x)=0.4783.

d. P(−1.5≤Z≤x)=0.2313.

e. P(−x≤Z≤x)=0.5467.

Q29. It is known that the glucose level in blood of diabetic persons follows a
normal distribution model with mean 106 mg/100 ml and standard deviation 8
mg/100 ml.
a. Calculate the probability of a random diabetic person having a glucose level
less than 120 mg/100 ml.

b. What percentage of persons have a glucose level between 90 and 120 mg/100
ml?

Q30. It is known that the cholesterol level in males 30 years old follows a
normal distribution with mean 220 mg/dl and standard deviation 30 mg/dl. If
there are 20000 males 30 years old in the population,

a. How many of them have a cholesterol level between 210 and 240 mg/dl?

b. If a cholesterol level greater than 250 mg/dl can provoke a thrombosis, how
many of them are at risk of thrombosis?

c. Calculate the cholesterol level above which 20% of the males are?

Q31. In a population with 40000 persons, 2276 have between 0.8 and 0.84
milligrams of bilirubin per deciliter of blood, and 11508 have more than 0.84.
Assuming that the level of bilirubin in blood follows a normal distribution
model,

a. Calculate the mean and the standard deviation.

b. How many persons have more than 1 mg of bilirubin per dl of blood?

Q32. . If 95% of households have a TV and 8 houses are surveyed, what is the
probability that more than 6 have a TV?

Q33. A manufacturer knows that an average of 1 out of 10 of his products are

faulty.

What is the probability that a random sample of 5 articles will contain:

a. No faulty products

b. Exactly 1 faulty products

c. At least 2 faulty products

d. No more than 3 faulty products

Q34. The probability that cars passing a speed camera are speeding is 0.23. If
750 cars pass the camera, how many of the cars would you expect to be
speeding and what would be the standard deviation?

VI. ESTIMATION

Q35. A population is known to be normally distributed with a standard

deviation of 2.8.

a. Compute the 95% confidence interval on the mean based on the following
sample of nine: 8, 9, 10, 13, 14, 16, 17, 20, 21.

b. Now compute the 99% confidence interval using the same data.

Q36. You do a study of hypnotherapy to determine how effective it is in

increasing the number of hours of sleep subjects get each night. You measure
hours of sleep for 12 subjects with the following results. Construct a 95%
confidence interval for the mean number of hours slept for the population
(assumed normal) from which you took the data.

8.2; 9.1; 7.7; 8.6; 6.9; 11.2; 10.1; 9.9; 8.9; 9.2; 7.5; 10.5

Q37. A group of researchers want to test the possible effect of an epilepsy

medication taken by pregnant mothers on the cognitive development of their
children. As evidence, they want to estimate the IQ scores of three-year-old
children born to mothers who where on this medication during pregnancy.
Previous studies suggest that the SD of IQ scores of three-year-old chilren is
18 points. How many such children should the researchers sample in order to
obtain a 90% confidence interval with a margin of error less than or equal to 4
points?
VII. HYPOTHESIS TESTING

Q38. An inventor has developed a new, energy-efficient lawn mower engine.

He claims that the engine will run continuously for 5 hours (300 minutes) on
a single gallon of regular gasoline. From his stock of 2000 engines, the
inventor selects a simple random sample of 50 engines for testing. The engines
run for an average of 295 minutes, with a population standard deviation of 20
minutes. Test the null hypothesis that the mean run time is 300 minutes against
the alternative hypothesis that the mean run time is not 300 minutes. Use a
0.05 level of significance. (Assume that run times for the population of engines
are normally distributed.)

Q39. Bon Air Elementary School has 1000 students. The principal of the
school thinks that the average IQ of students at Bon Air is at least 110. To
prove her point, she administers an IQ test to 20 randomly selected students.
Among the sampled students, the average IQ is 108 with a sample standard
deviation of 10. Based on these results, should the principal accept or reject
her original hypothesis? Assume a significance level of 0.01. (Assume that test
scores in the population of engines are normally distributed.)

Q40. A particular brand of tires claims that its deluxe tire averages 50,000
miles before it needs to be replaced. From past studies of this tire, the standard
deviation is known to be 8,000. A survey of owners of that tire design is
conducted. From the 28 tires surveyed, the mean lifespan was 46,500 miles
with a standard deviation of 9,800 miles. Using α=0.05, is the data highly
inconsistent with the claim?

Q41. A Nissan Motor Corporation advertisement read, “The average man’s

I.Q. is 107. The average brown trout’s I.Q. is 4. So why can’t man catch brown
trout?” Suppose you believe that the brown trout’s mean I.Q. is greater than
four. You catch 12 brown trout. A fish psychologist determines the I.Q.s as
follows: 5; 4; 7; 3; 6; 4; 5; 3; 6; 3; 8; 5. Using α=0.05, conduct a hypothesis
test of your belief.

Q42. The television habits of 30 children were observed. The sample mean
was found to be 48.2 hours per week, with a standard deviation of 12.4 hours
per week. Using α=0.05, test the claim that the standard deviation was at least
16 hours per week.

Q43. After many years of teaching, a statistics pro- fessor computed the
variance of the marks on her final exam and found it to be a2 = 250. She
recently made changes to the way in which the final exam is marked and
wondered whether this would result in a reduction in the variance. A random
sample of this year’s final exam marks are listed here. Can the pro- fessor infer
at the 10% significance level that the variance has decreased?

1. 92 99 73 62 64 75 70 88 60
Q44. The US Department of Energy reported that 51.7% of homes were
heated by natural gas. A random sample of 221 homes in Kentucky found that
115 were heated by natural gas. Does the evidence support the claim for
Kentucky at the α=0.05 level in Kentucky?

Q45. A number of restaurants feature a device that allows credit card users to
swipe their cards at the table. It allows the user to specify a percentage or a
dollar amount to leave as a tip. In an experiment to see how it works, a random
sample of credit card users was drawn. Some paid the usual way, and some
used the new device. The percent left as a tip was recorded and listed below.
Can we infer that users of the device leave larger tips at the α=0.05 level? (
𝜎1 = 𝜎2 )

Usual 10.3 15.2 13.0 9.9 12.1 13.4 12.2 14.9 13.2 12.0
Device 13.6 15.7 12.9 13.2 12.9 13.4 12.1 13