Question

For questions 20 – 23 answer all the following questions:

a)State the Null and Alternate Hypotheses

b) Which is the claim?
c) Describe the reject region as left tailed, right tailed or two-tailed.

d) Will you use a z-test or a t-test? What is the critical value?

e) Find the sample statistic.

f) Do you reject or fail to reject the claim? Write out your decision in at least one sentence.

21. It is claimed that the average annual per person spending on all prescription drugs is $ 410 with a standard deviation of $45. A survey of 64 randomly selected individuals found that average annual per person spending was $425. Using a 5% significance level test this claim.

Answer 1

a)
Null hypothesis, H0: mu = 410
Alternative hypo, Ha: mu not = 410

b)
Here the claim is mu = 410

c)
This is two tailed test

d)
z-test will be used as population std. dev. is given

P(z < -1.96) = P(z > 1.96) = 0.025
Rejection region will be on the both sides of the curve because this is two tailed test
Reject H0 if z < -1.96 or z > 1.96

critical alues are -1.96 and 1.96

e)
test statistic,
z = (xbar - mu)/(sigma/sqrt(n))
z = (425 - 410)/(45/sqrt(64))
z = 2.67

f)
As test statistic > 1.96, reject H0
There is not sufficient evidence to conclude that the average annual per person spending on all prescription drugs is $ 410