Suppose the national average dollar amount for an automobile

Suppose the national average dollar amount for an automobile insurance claim is $758.83. You work for an agency in Michigan and you are interested in whether or not the state average is less than the national average. The hypotheses for this scenario are as follows. Null Hypothesis: 758.83, Alternative Hypothesis: < 758.83. You take a random sample of claims and calculate a p-value of 0.0349 based on the data, what is the appropriate conclusion? Conclude at the 5% level of significance.

A. The true average claim amount is significantly higher than $758.83.

B. The true average claim amount is higher than or equal to $758.83.

C. We did not find enough evidence to say the true average claim amount is less than $758.83.

D. The true average claim amount is significantly different from $758.83.

E. The true average claim amount is significantly less than $758.83.

Solution

Set Up Hypothesis
Null Hypothesis H0: U>=758.83
Alternate Hypothesis H1: U<758.83
P-Value : Left Tail - Ha : P = 0.0349
Hence Value of P0.05 > 0.0349, Here we Reject Ho

ANS:

E. The true average claim amount is significantly less than $758.83