Question

The average gasoline price at Chevron was $3.12 per gallon last month. Due to the recent nation-wide gas price drop, the chief marketing officer of Chevron believes that there has been a significant reduction in the average gas price. In order to test his belief, he randomly selected a sample of 36 of Chevron gas stations and found the average gas price of these stations was $3.06. Assume that the population standard deviation of the population is $0.12, and the significance level (α) is 5%.

Step 1: Formulate the null and the alternative hypotheses:

H₀:

H_a:

What kind of test is this? (Upper-tailed, lower-tailed or two-tailed test)

Step 2: Find the test statistic. Is this a z-score or a t-score?

Critical Value Approach

Step 3: Using the critical value approach, what is the critical value?

Critical Value Approach

What is your conclusion (reject or fail to reject the null)?

Answer 1