92.0k views
0 votes
The average gasoline price of one of 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. Furthermore, assume that the standard deviation of the population is $0.14.

a) Compute the standard error

b) Compute the test statistic

c) What is the p-value?

d) Develop appropriate hypothesis such as the reject of the null will support the contention that management efficiency measures had reduce gas prices in Europe.

e) At α = 0.05, what is your conclusion? Use critical value approach

f) Repeat the preceding hypothesis test using the p-value approach.

1 Answer

2 votes

Answer:

a)
SE= (\sigma)/(√(n))= (0.14)/(√(49))= 0.02

b)
t =(1.20-1.25)/(0.02)= -2.5

c)
p_v =P(z<-2.5) =0.00621

d) Null hypothesis:
\mu \geq 1.25

Alternative hypothesis:
\mu<1.25

e) For this case we need to find a critical value who accumulate 0.05 of the area in the left at the normal standard distribution and we got:


z_(crit)= -1.64

Since our calculated value is lower than the critical value we have enough evidence to reject the null hypothesis at the significance level provided of 5%

f)
p_v = P(z<-2.5) = 0.00621

Since the p value is lower than the significance level we have enough evidence to reject the null hypothesis at 5% of significance. Same result with the critical value approach.

Explanation:

For this case we want to test is the true mean for the gasoline prices are significantly reduced from $1.25 per liter, so then the system of hypothesis are:

Null hypothesis:
\mu \geq 1.25

Alternative hypothesis:
\mu<1.25

Part a

The standard error for this case is given by:


SE= (\sigma)/(√(n))= (0.14)/(√(49))= 0.02

Part b

The statistic for this hypothesis is given by:


t = (\bar X -\mu)/(SE)

And replacing the info provided we got:


t =(1.20-1.25)/(0.02)= -2.5

Part c

Since we are conducting a left tailed test the p value would be given by:


p_v =P(z<-2.5) =0.00621

And we can use the following excel code to find it:

=NORM.DIST(-2.5,0,1,TRUE)

Part d

Null hypothesis:
\mu \geq 1.25

Alternative hypothesis:
\mu<1.25

Part e

For this case we need to find a critical value who accumulate 0.05 of the area in the left at the normal standard distribution and we got:


z_(crit)= -1.64

Since our calculated value is lower than the critical value we have enough evidence to reject the null hypothesis at the significance level provided of 5%

Part f


p_v = P(z<-2.5) = 0.00621

Since the p value is lower than the significance level we have enough evidence to reject the null hypothesis at 5% of significance. Same result with the critical value approach.

User Yeahia Md Arif
by
8.4k points
Welcome to QAmmunity.org, where you can ask questions and receive answers from other members of our community.