1) The nationwide mean price for a 3-year old Honda civic is $8,500 with a known standard deviation of $600. You check the newspaper and find nine 3-year old Civics in San Francisco selling for an average price of $9,000. You wonder whether the cost of Civics in San Francisco is higher than the rest of the nation.
a) State your question about the price of Civics in terms of a null and an alternative Hypothesis. What are you assuming about the distribution of Civic prices?
b) Will the alternative hypothesis be one-sided or two-sided? Defend your answer.
c) Test your null hypothesis. Do you accept or reject it and at what p-value? Construct a 95% confidence interval for Civic prices in San Francisco.
d) Redo your analysis, but this time assume that the sample size is 10 with a sample average of $9,000 and a sample standard deviation of $600. Assume that you don't know the value of the nationwide standard deviation.
This solution is provided in a 2 page .doc file. It lists the hypotheses of the test, as well as calculates the Z-statistic and confidence interval.