Question

The rising cost of malpractice insurance is a growing problem. A random sample of thirty-three General Surgery claims from TN had a mean cost of $47505 with a standard deviation of $1535. a. Find a 95% confidence interval for the mean claim amount of all General Surgery claims in TN.

b. Interpret the confidence interval in the words of the problem.

c. Find the error bound.

d. A senator claims that mean for all General Surgery claims in TN is more than $45000. Is there evidence to support or refute this claim? Justify!

Answer 1

Ans:

a)n=33

df=33-1=32

t*=tinv(0.05,32)=2.037

95% confidence interval for true mean claim amount

=47505+/-2.037*(1535/SQRT(33))

=(46960.7, 48049.3)

b)we are 95% confident that true mean claim amout falls between 46960.7 and 48049.3.

c)error bound=2.037*(1535/SQRT(33))=544.30

d)As,lower limit of above confidence interval is greater than 45000,there is sufficient evidence to support the claim that the mean for all General Surgery claims in TN is more than $45000