The Internal Revenue Service reports that the mean federal income tax paid in the year 2010 was $8040. Assume that the standard deviation is $4500. The IRS plans to draw a sample of 1000 tax returns to study the effect of a new tax law.

a) a) What is the probability that the sample mean tax is less than $8000? Round the answer to at least four decimal places.
(b) What is the probability that the sample mean tax is between 7400 and 8000? Round the answer to at least four decimal places.
(c) Find the 60th percentile of the sample mean. Round the answer to at least two decimal places.
(d) Would it be unusual if the sample mean were less than 7600? Round answer to at least four decimal places.
it [would or wouldnt] be unusual because the probability is [?]

(e) Do you think it would be unusual for an individual to pay a tax of less than 7600? Explain. Assume the variable is normally distributed. Round the answer to at least four decimal places.
[yes or no?] because the probability is [?]

1 answer

To solve these problems, we will use the concept of the sampling distribution of the sample mean. Given the population mean (\(\mu\)) is $8040, and the standard deviation (\(\sigma\)) is $4500, we can calculate the standard deviation of the sample mean (standard error) using the formula:

\[ \text{Standard Error (SE)} = \frac{\sigma}{\sqrt{n}} = \frac{4500}{\sqrt{1000}} \approx 142.94 \]

Let’s proceed with each part:

(a) What is the probability that the sample mean tax is less than $8000?

We need to find the z-score first:

\[ z = \frac{\bar{x} - \mu}{\text{SE}} = \frac{8000 - 8040}{142.94} \approx \frac{-40}{142.94} \approx -0.279 \]

Now we will use the z-table or standard normal distribution to find the probability:

\[ P(Z < -0.279) \approx 0.3897 \]

Answer: The probability that the sample mean tax is less than $8000 is approximately 0.3897.

(b) What is the probability that the sample mean tax is between 7400 and 8000?

We will find the z-scores for both amounts:

  1. For $7400: \[ z = \frac{7400 - 8040}{142.94} \approx \frac{-640}{142.94} \approx -4.48 \]

  2. For $8000 (already calculated): \[ z \approx -0.279 \]

Now we find the corresponding probabilities:

  • \(P(Z < -4.48) \approx 0\) (very close to zero)
  • \(P(Z < -0.279) \approx 0.3897\)

Now subtract those probabilities to get the area between:

\[ P(7400 < \bar{x} < 8000) = P(Z < -0.279) - P(Z < -4.48) \approx 0.3897 - 0 \approx 0.3897 \]

Answer: The probability that the sample mean tax is between $7400 and $8000 is approximately 0.3897.

(c) Find the 60th percentile of the sample mean.

The z-score for the 60th percentile is approximately 0.253 (using z-tables).

Now, we calculate the corresponding sample mean:

\[ \bar{x} = \mu + z \cdot \text{SE} = 8040 + 0.253 \cdot 142.94 \approx 8040 + 36.179 \approx 8076.18 \]

Answer: The 60th percentile of the sample mean is approximately 8076.18.

(d) Would it be unusual if the sample mean were less than 7600?

Calculate the z-score for $7600:

\[ z = \frac{7600 - 8040}{142.94} \approx \frac{-440}{142.94} \approx -3.08 \]

Now, find the corresponding probability:

\[ P(Z < -3.08) \approx 0.001 \]

Since this probability is very small (less than 0.05), it can be considered unusual.

So, the answer is:

**It would be unusual because the probability is approximately 0.0010.

(e) Do you think it would be unusual for an individual to pay a tax of less than 7600?

We use the standard deviation of the population for individuals, which is $4500. We calculate the z-score:

\[ z = \frac{7600 - 8040}{4500} \approx \frac{-440}{4500} \approx -0.0978 \]

Now, find the corresponding probability:

\[ P(Z < -0.0978) \approx 0.4615 \]

This probability is not considered unusual (close to 0.5).

The answer is:

No, because the probability is approximately 0.4615.