Question

Question 2: The average price for a BMW 3 Series Coupe 335i is $39,368. Suppose these prices are also normally distributed with a standard deviation of $2,367. What percentage of BMW dealers are pricing the BMW 3 Series Coupe 335i at more than the average price ($44,520) for a Mercedes CLK350 Coupe? Round your answer to 3 decimal places.

Answer 1

0.015 = 1.5% of BMW dealers are pricing the BMW 3 Series Coupe 335i at more than the average price ($44,520) for a Mercedes CLK350 Coupe

Explanation:

When the distribution is normal, we use the z-score formula.

In a set with mean
`\mu` and standard deviation
`\sigma`, the zscore of a measure X is given by:

`Z = (X - \mu)/(\sigma)`

The Z-score measures how many standard deviations the measure is from the mean. After finding the Z-score, we look at the z-score table and find the p-value associated with this z-score. This p-value is the probability that the value of the measure is smaller than X, that is, the percentile of X. Subtracting 1 by the pvalue, we get the probability that the value of the measure is greater than X.

In this question, we have that:

`\mu = 39368, \sigma = 2367`

What percentage of BMW dealers are pricing the BMW 3 Series Coupe 335i at more than the average price ($44,520) for a Mercedes CLK350 Coupe?

This is 1 subtracted by the pvalue of Z when X = 44520. So

`Z = (X - \mu)/(\sigma)`

`Z = (44520 - 39368)/(2367)`

`Z = 2.18`

`Z = 2.18` has a pvalue of 0.985

1 - 0.985 = 0.015

0.015 = 1.5% of BMW dealers are pricing the BMW 3 Series Coupe 335i at more than the average price ($44,520) for a Mercedes CLK350 Coupe