INTERNATIONAL UNIVERSITY Semester 1, Academic Year 2018-2019

TUTORIAL MATERIAL
Hypothesis Testing
1. An automobile manufacturer substitutes a different engine in cars that were known to have an average miles-
per-gallon rating of 31.5 on the highway. The manufacturer wants to test whether the new engine changes the
miles-per-gallon rating of the automobile model. A random sample of 100 trial runs gives a mean of 29.8
miles per gallon and s=6.6 miles per gallon. Using the 0.05 level of significance, is the average miles-per-
gallon rating on the highway for cars using the new engine different from the rating for cars using the old
engine?
2. According to Money, the average appreciation, in percent, for stocks has been always more than 4.3% for the
five-year period ending in May 2007. An analyst tests this claim by looking at a random sample of 20 stocks
and finds a sample mean of 3.8% and a sample standard deviation of 1.1%. Using alpha 0.05, does the analyst
have statistical evidence to reject the claim made by the magazine?
3. Average total daily sales at a small food store are known to be $452.80. The store’s management recently
implemented some changes in displays of goods, order within aisles, and other changes, and it now wants to
know whether average sales volume has increased. A random sample of 12 days shows mean of $501.90 and
standard deviation of $65.00. Using α = 0.05, is the sampling result significant? Explain.
4. New software companies that create programs for World Wide Web applications believe that average staff
age at these companies is younger than 27. To test this hypothesis, a random sample is collected:
41, 18, 25, 36, 26, 35, 24, 30, 28, 19, 22, 22, 26, 23, 24, 31, 22, 22, 23, 26, 27, 26, 29, 28, 23, 19, 18, 18, 24,
24, 24, 25, 24, 23, 20, 21, 21, 21, 21, 32, 23, 21, 20
Test, using α = 0.05
5. A new chemical process is introduced by Duracell in the production of lithium-ion batteries. For batteries
produced by the old process, the average life of a battery is 102.5 hours. To determine whether the new
process affects, specifically increases, the average life of the batteries, the manufacturer collects a random
sample of 25 batteries produced by the new process and uses them until they run out. The sample mean life is
found to be 107 hours, and the sample standard deviation is found to be 10 hours. Are these results significant
at the α = 0.05 level? Are they significant at the α = 0.01 level? Explain. Draw your conclusion
6. Suppose that the Goodyear Tire Company has historically held 42% of the market for automobile tires in the
United States. Recent changes in company operations, especially its diversification to other areas of business,
as well as changes in competing firms’ operations, prompt the firm to test the validity of the assumption
that it still controls 42% of the market. A random sample of 550 automobiles on the road shows that 219 of
them have Goodyear tires. Conduct the test at α = 0.01.
7. The manufacturer of electronic components needs to inform its buyers of the proportion of defective
components in its shipments. The company has been stating that the percentage of defectives is at most 14%.
The company wants to test whether the proportion of all components that are defective is as claimed. A
random sample of 100 items indicates 17 defectives. Use α = 0.05 to test the hypothesis.
8. According to BusinessWeek, the average market value of a biotech company is less than $250 million. A
sample of 30 firms reveals an average of $235 million and a standard deviation of $85 million. Conduct the
test at α = 0.05 and α = 0.01. State your conclusions.
9. A company’s market share is very sensitive to both its level of advertising and the levels of its competitors’
advertising. A firm known to have a 56% market share wants to test whether this value is still valid in view of
recent advertising campaigns of its competitors and its own increased level of advertising. A random sample
of 500 consumers reveals that 298 use the company’s product. Is there evidence to conclude that the
company’s market share is no longer 56%, at the 0.01 level of significance?

STATISTICS FOR BUSSINESS – TA NGUYEN BAO MINH TRI 1

INTERNATIONAL UNIVERSITY Semester 1, Academic Year 2018-2019

10. The U.S. Department of Commerce estimates that 17% of all automobiles on the road in the United States at a
certain time are made in Japan. An organization that wants to limit imports believes that the proportion of
Japanese cars on the road during the period in question is higher than 17% and wants to prove this. A random
sample of 2,000 cars is observed, 381 of which are made in Japan. Conduct the hypothesis test at α = 0.01,
and state whether you believe the reported figure.
11. The unemployment rate in Britain during a certain period was believed to have been 11%. At the end of the
period in question, the government embarked on a series of projects to reduce unemployment. The
government was interested in determining whether the average unemployment rate in the country had
decreased as a result of these projects, or whether previously employed people were the ones hired
for the project jobs, while the unemployed remained unemployed. A random sample of 3,500 people was
chosen, and 421 were found to be unemployed. Do you believe that the government projects reduced the
unemployment rate?
12. An advertisement for the Audi TT model lists the following performance specifications: standing start, 0–50
miles per hour in an average of 5.28 seconds; braking, 60 miles per hour to 0 in 3.10 seconds on the average.
An independent testing service hired by a competing manufacturer of high-performance automobiles
wants to prove that Audi’s claims are exaggerated. A random sample of 100 trial runs gives the following
results: standing start, 0–50 miles per hour in an average of 5.8 seconds and s = 1.9 seconds; braking, 60 miles
per hour to 0 in an average of 3.21 seconds and s = 0.6 second. Carry out the two hypothesis tests, state the p-
value of each test, and state your conclusions.
13. The engine of the Volvo model S70 T-5 is stated to provide 246 horsepower. To test this claim, believing it is
too high, a competitor runs the engine n=25 times, randomly chosen, and gets a sample mean of 239
horsepower and standard deviation of 20 horsepower. Conduct the test, using alpha 0.01.
14. According to an article in the New York Times, new Internet dating Web sites use sex to advertise their
services. One such site, True.com, reportedly received an average of 3.8 million visitors per month. Suppose
that you want to disprove this claim, believing the actual average is lower, and your random sample of 15
months revealed a sample mean of 2.1 million visits and a standard deviation of 1.2 million. Conduct the test
using α = 0.05.
15. Executives at Gammon & Ninowski Media Investments, a top television station brokerage, believe that the
current average price for an independent television station in the United States is no more than$125 million.
An analyst at the firm wants to check whether the executives’ claim is true. The analyst has no prior suspicion
that the claim is incorrect in any particular direction and collects a random sample of 25 independent TV
stations around the country. The results are (in millions of dollars): 233, 128, 305, 57, 89, 45, 33, 190, 21,
322, 97, 103, 132, 200, 50, 48, 312, 252, 82, 212, 165, 134, 178, 212, 199. Test the hypothesis using a
significance level of your choice.
16. Suppose that a claim is made that the average billionaire is 60 years old or younger. The following is a
random sample of billionaires’ ages, drawn from the Forbes list.
80, 70, 76, 54, 59, 52, 74, 64, 76, 67, 39, 67, 43, 62, 57, 91, 55
Conduct the test using the 0.05 level of significance.

STATISTICS FOR BUSSINESS – TA NGUYEN BAO MINH TRI 2