A tax return is flagged by the computer. What is the chance that it actually contains mistakes, given that the computer flagged it?
A tax return is flagged by the computer. What is the chance that it actually contains mistakes, given that the computer flagged it?
Chapter12: Tax Administration And Tax Planning
Section: Chapter Questions
Problem 2P
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![1. When the State of Delaware receives tax forms, it puts them through a computer program to flag forms that
need to be investigated further. The computer looks for mistakes in the forms (example: addition mistakes or
incorrect deduction amounts).
Suppose the computer correctly flags 80% of all returns that have mistakes, and it incorrectly flags 5% of
error-free returns. Further, suppose that 15% of all tax returns have errors.
A tax return is flagged by the computer. What is the chance that it actually contains mistakes, given that the
computer flagged it?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F6c6ff8f3-3d0d-4502-8ce7-f57969404f1e%2F67d0568b-7edd-4527-a1fa-13bff73ba258%2Fetcvrc6_processed.jpeg&w=3840&q=75)
Transcribed Image Text:1. When the State of Delaware receives tax forms, it puts them through a computer program to flag forms that
need to be investigated further. The computer looks for mistakes in the forms (example: addition mistakes or
incorrect deduction amounts).
Suppose the computer correctly flags 80% of all returns that have mistakes, and it incorrectly flags 5% of
error-free returns. Further, suppose that 15% of all tax returns have errors.
A tax return is flagged by the computer. What is the chance that it actually contains mistakes, given that the
computer flagged it?
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