Question

In: Statistics and Probability

In a city in the Southwest, restaurants charge on the average $15.65 for a steak dinner...

In a city in the Southwest, restaurants charge on the average $15.65 for a steak dinner (with a standard deviation of $0.65), $8.65 for a chicken dinner (with a standard deviation of $0.35), and $22.95 for a lobster dinner (with a standard deviation of $1.30). If a restaurant in this city charges $16.25 for a steak dinner, $9.15 for a chicken dinner, and $23.95 for a lobster dinner, which of the three dinners is relatively more overpriced?

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Expert Solution

The restaurants charge on the average $15.65 for a steak dinner, with a standard deviation of $0.65.

A particular restaurant in this city charges $16.25 for a steak dinner.

Now, we know that the relative price is measured by the ratio of the difference between the observation and the mean, to the standard deviation.

So, the relative price for steak dinner in the restaurant is

=(16.25-15.65)/0.65

=0.60/0.65

=0.9230.

The restaurants charge on the average $8.65 for a chicken dinner, with a standard deviation of $0.35.

The particular restaurant in this city charges $9.15 for a chicken dinner.

Now, we know that the relative price is measured by the ratio of the difference between the observation and the mean, to the standard deviation.

So, the relative price for chicken dinner in the restaurant is

=(9.15-8.65)/0.35

=0.50/0.35

=1.4285.

The restaurants charge on the average $22.95 for a lobster dinner, with a standard deviation of $1.30.

A particular restaurant in this city charges $23.95 for a lobster dinner.

Now, we know that the relative price is measured by the ratio of the difference between the observation and the mean, to the standard deviation.

So, the relative price for lobster dinner in the restaurant is

=(23.95-22.95)/1.30

=1/1.30

=0.7692.

So, here we see that the realtive price of chicken dinner is $1.4285, which is greater than the relative price for steak and lobster dinner.

So, out of the three dinners, chicken dinner is relatively more overpriced.

orchestra answered 2 years ago
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