7. When you submit your tax return to the IRS, they screen your return for indications...

90.2K

Verified Solution

Question

Statistics

7. When you submit your tax return to the IRS,they screen your return for indications of fraud. Naturally thescreening system is not perfect: only 92% of fraudulent tax returnsget red-flagged (that is, the IRSâ€™ system detects the fraud), and9% of honest tax returns get red-flagged (the system mistakenlybelieves these good returns to be fraudulent). A tax return the IRSbelieves not to be fraudulent is said to be â€œgreen-flagged.â€Suppose that 4% of all tax returns are fraudulent.(a) What percent of all tax returns are correctlyflagged?
(b) If a tax return is red-flagged, what is theprobability this return is fraudulent?
(c) The answer to part (b) might worry anadministrator at the IRS (or a taxpayer, for that matter!). Brieflyexplain what causes the answer to part (b) to be somewhat low.

Answer & Explanation Solved by verified expert

4.2 Ratings (500 Votes)

We have given below informationp flagged red honest tax returns 009p flagged green honest tax returns 091p flagged red fraudulent tax returns 092p flagged green fraudulent tax returns 008phonest tax returns 096pfraudulent tax returns 004a What percent of all tax See Answer

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member