Question

The price of a certain combo meal at different franchises of a national fast food company varies from $5.00 to $7.36 and has a known standard deviation of $2.11. A sample of 23 students in an online course that includes students across the country stated that their average price is $5.75. The students have also stated that they are generally unwilling to pay more than $6.50 for this meal. Formulate and conduct a hypothesis test to determine if you can conclude that the population mean is less than $6.50.

For all hypothesis tests, assume that the level of significance is 0.05 unless otherwise stated.

Answer #1

H0: >= 6.50

Ha: < 6.50

Test statistics

z = ( - ) / ( / sqrt(n) )

= ( 5.75 - 6.50) / (2.11 / sqrt ( 23) )

= -1.70

Critical value at 0.05 significance level = -1.645

Since test statistics falls in rejection region, that is test statistics < -1.645, Reject H0.

We conclude that we have sufficient evidence to support the claim that the population mean is less than $6.50.

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