Question

Let’s say the average per capita annual health care cost for mid-size US-based corporations is $5,886.  An organization competing for business has funded several health maintenance organizations (HMOs).   A sample of their average annual costs per person is as follows:

$5591  4451    5546    4494    4437    5561    5527    5523    6602    4481    

The hypothesis is that HMOs are an improvement.   Are they? (5 pts. Each)

a) State the appropriate null hypothesis and alternative hypothesis. (Should it be one- or two-tailed?)

b) Calculate the mean, standard error, and t-statistic.

c) If you want to be 95% confident in you decision, what rejection region should you use? Explain how you obtain your answer.

d) What is the p-value associated with the test statistic?  How do you interpret this?  Explain how you obtain your answer.

Answer 1