Question
In: Statistics and Probability
An insurance company would like to compare the cost of claims at their company in two...
An insurance company would like to compare the cost of claims at their company in two different states. They take a random sample of 50 of their claims from each state. A second insurance company claims that the samples are dependent and that any conclusions drawn are invalid. Do you agree? Explain. Select the correct answer below: No, the claims made in one state should not have any effect on the claims in another state. The company is only comparing their own claims, so the samples can be considered independent. Yes, since the samples are only taken from one insurance company, they are not a random sample of all of the claims. No, two samples are only independent if there is at least some overlap between the two samples. Yes, the two states could be close to each other, making some of the claims potentially the same.
Solutions
Expert Solution
Correct option:
No, the claims made in one state should not have any effect on the claims in another state.
Explanation:
Two samples are dependent if the members of one sample can be used to determine the members of the other sample. Here it is given, " to compare the cost of claims at their company in two different states". So, in this case, the 2 samples pertain to the cost of claims at their company in two different states and hence they are independent.
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