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# Test hypothesis that automakers will produce midsized cars

Suppose the federal government gives a substantial tax break to automakers producing midsized cars that get a mean mileage exceeding 31 MPG. A sample of 49 mileages has a mean x-bar of 31.350 and a standard deviation of s=0.799. Let u be the midsize car's mean mileage. Assume alpha=0.01

a) The following questions, representing the five-setp hypothesis testing procedure will help you to decide whether the claoim if receiving the tax break is valid,

1. Formulate null and alternative hypotheses for the claim of receiving the tax break

2. Determine the criterion for rejection or non rejection of the null hypothesis interms of critical values

3. Calculate the test statistic

4. Compare the test statistic to the rejection region and make a judgement about Ho.

5. Interpret the statistical decision in terms of the problem (original claim)

6. Will the auto maker be awarded the tax break?

b) 1. Compute the observed p-value in the hypothesis test

2. Using the p-value, what decision would you make about Ho? Why?

3. Based on the p-value, would you make the same decision at alpha of 0.001?

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See attached file for formulas.

Suppose the federal government gives a substantial tax break to automakers producing midsized cars that get a mean mileage exceeding 31 MPG. A sample of 49 mileages has a mean of 31.350 and a standard deviation of s=0.799. Let &#956; be the midsize car's mean mileage. Assume &#945;=0.01

a) The following questions, representing the five-step hypothesis testing procedure will ...

#### Solution Summary

Test hypothesis that automakers will produce midsized cars are examined.

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