Question

The cost of a daily newspaper varies from city to city. however, the variation among prices remains steady with a standard deviation of 20?. a study was done to test the claim that the mean cost of a daily newspaper is $1.00. ten costs yield a mean cost of 96? with a standard deviation of 18?. do the data support the claim at the 1% level?

Answer 1

First, we establish our hypothesis:

Null hypothesis H0: μ = $1.00

Alternative hypothesis Ha: μ ≠ $1.00

Let’s say X = the sample average cost of a daily newspaper = 0.96

u = population mean cost = 1.00

S = sample standard deviation = 0.18

Calculating for z value:

z = (X – u) / S

z = (0.96 – 1) / 0.18

z = – 0.222

From the standard distribution table at this z value, p-value = 0.4129

Since alpha = 0.01, the decision therefore is:

Do not reject the null hypothesis because the p-value is greater than 0.01. There is enough evidence to support the claim that the mean cost of newspapers is $1.