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A company believes that the average price of its new model is less than the claimed...

A company believes that the average price of its new model is less than the claimed value of $11,500 with a standard deviation of $700. A check of the sticker price on 32 cars finds the average is $11,200. At = 0.05, test the company 's belief

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Answer #1

Let denotes the averagebprice of the new model of the company.

We have to test, H0: = 11500 against H1: < 11500.

H0 and H1 are null and alternative hypotheses respectively.

The test-statistic is given by, T = = = -2.4244

Under H0, T ~ t-distribution with (n-1) d.f. i.e. 31 d.f.

The p-value is = P(T < - 2.4244) = 0.0107

Since, p-value < level of significance (0.05), we reject the null hypothesis H0 and conclude there is sufficient evidence that the company's claim is correct.

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