In: Statistics and Probability
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 $4000. A random sample of 28 total hospital charges for patients involved in this type of crash has a standard deviation of $4900. At alpha equals 0.10α=0.10 can you support the agent's claim? Use the P-value method to test the claim.
Solution: The null and alternative hypotheses are:
Under the null hypothesis, the test statistic is:
The p-value is:
Conclusion: Since the p-value is greater than the significance level 0.10, we, therefore, fail to reject the null hypothesis and conclude that there is not sufficient evidence to support the agents claim