In order to determine the average price of hotel rooms in Atlanta, a sample of 6

Question

In order to determine the average price of hotel rooms in Atlanta, a sample of 64 hotels was selected. It was determined that the average price of the rooms in the sample was $112. The population standard deviation is known to be $16. Use a 0.1 level of significance and determine whether or not the average room price is significantly different from $108.50.

a.     a. Determine your hypotheses.

b.      b.   Compute the test statistic.

c.      c.   What’s the rejection rule?

d.    d.   At the =.1 level of significance, your Critical Value is

e.     e.   What conclusion can be drawn from this test at a 0.1 significance level?

Select the correct answers for a, b, c, d, and e below.

Explanation / Answer

a.   H0: = 112;   Ha: 112  

b)

std error =std deviation/(n)1/2 =16/(64)1/2 =2

therefore test statistic z=(X-mean)/std error =(112-108.5)/2=1.75

b.   1.75

c)

c.   Reject H0 if |z|>z/2

d)

d.   1.645

e.   There is enough evidence to reject Ho.

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