Question

An insurance agent says the standard deviation of the total hospital charges for patients involved in a crash in which the vehicle struck a construction barricade is less than

​$3400.

A random sample of

22

total hospital charges for patients involved in this type of crash has a standard deviation of

​$3700.

At

α=0.10

can you support the​ agent's claim? Use the​ P-value method to test the claim.

Answer 1

s = 3700, n = 22

α = 0.10

Null and alternative hypothesis:          
Hₒ : σ = 3400      
H₁ : σ < 3400      
          
Test statistic:          
χ² = (n-1)s² / σ² = 24.8694
          
Degree of freedom:          
Df = n -1 = 21
             
p-value = 1-CHISQ.DIST.RT(24.8694, 21) = 0.7471      
          
Decision:          
p-value > α, Do not reject the null hypothesis.