A Random Sample of 2,000 Individuals from Three Different Cities

question 4

Essay

A random sample of 2,000 individuals from three different cities was asked whether they owned a foreign or a domestic car. The following contingency table shows the results of the survey.
​ $$\begin{array}{l}\begin{array} { c | c c c | c } &&\text { City }\\\text { Type of Car } & \text { Detroit } & \text { Atlanta } & \text { Denver } & \text { Total } \\\hline \text { Domestic } & 80 & 200 & 520 & 800 \\\text { Foreign } & 120 & 600 & 480 & 1,200 \\\hline \text { Total } & 200 & 800 & 1,000 & 2,000\end{array}\end{array}$$ At α = .05, test to determine if the type of car purchased is independent of the city in which the purchasers live.

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Definitions:

Risk-averse

A description of an investor or decision-maker who prioritizes minimizing risk over achieving potentially higher gains.

Certain Payoff

A guaranteed outcome or return from an investment, where the investor has absolute certainty over the amount to be received.

Asymmetric Information

A situation in which one party in a transaction has more or superior information compared to another.

Market Failures

Situations in which the allocation of goods and services by a free market is not efficient, often leading to a net social welfare loss.