Answer:
a) p=0.021
b) p=0.029
c) Exactly one audit: P=0.0965
More than one audit: P=0.0042
Step-by-step explanation:
a) If the income is less than $100,000, there is a probability of 21 in 1,000 of being audited. This is:
If the income is equal or more than $100,000, there is a probability of 29 in 1,000 of being audited. This is:
b) If we have 5 taxpayers with incomes under $100,000, and we want to know the probability that exactly one will be audited, we can model this a binomial randome variable, with p=0.021 and n=5:
There is a probability of 0.0965 that exactly one out of a sample of five taxpayers with incomes under $100,000 will be audited.
To calculate the probability that more than one will be audited, we use the same distribution:
There is a probability of 0.0042 that more than one out of a sample of five taxpayers with incomes under $100,000 will be audited.