The probability of a small business declaring bankruptcy was believed to be the same in any month.Also the number of small businesses that declared bankruptcy was the same every month.Which of the following distributions would you use to determine the probability that more than 3 bankruptcies will occur next month?
A)Hypergeometric distribution
B)Poisson distribution
C)Uniform distribution
D)Binomial distribution

Question

Quizplus · Accepted Answer

The Poisson distribution is commonly used to model the number of occurrences of rare events over a certain time or space interval. In this case, we are interested in the probability of more than 3 small businesses declaring bankruptcy in a month, which is a rare event. Therefore, the Poisson distribution is the best choice for this scenario. The other distributions are not suitable as they do not fulfill the conditions of independence and identical probabilities required for this scenario.

The Probability of a Small Business Declaring Bankruptcy Was Believed