Question

The average gasoline price of one the major oil companies in Europe has been $1.25 per liter. Recently, the company has undertaken several efficiency measures in order to reduce prices. Management is interested in determining whether their efficiency measures have actually reduced prices. A random sample of 49 of their gas stations is selected and the average price is determined to be $1.20 per liter. Futhermore, assume that the standard deviation of the population is $0.14.

using the information in the paragraph above, the value of the test statistic for this hypothesis test is

-1.96

-1.645

- (-2.5)

- 1.645

_______________________________________________

^^^^^(I submitted of my questions for above already)

Question:

Based on the test statistic computed in the previous question ( and using the information in the paragraph above), we would

-fail to reject the null hypothesis and conclude that the prices are lower

-fail to reject the null hypothesis and conclude prices are higher

-Accept the null hypothesis and conclude that we cannot say whether prices are lower

-reject the null hypothesis and conclude that the prices are lower

Answer 1

Solution :

This is the left tailed test .

The null and alternative hypothesis is

H₀ :   = 1.25

H_a : < 1.25

Test statistic = z

= ( - ) / / n

= (1.20 - 1.25) / 0.14 / 49

z = -2.5

Test statistic = -2.5

P(z < -2.5) = 0.0062

P-value = 0.0062

= 0.05

P-value <

Reject the null hypothesis and conclude that the prices are lower .