A Tillinghast-Towers-Perrin (TTP) study estimated the cost of the U.S. tort system to be $260 billion. This is approximately $886 per U.S. citizen. A response by the Economic Policy Institute (EPI) indicated that approximately half of the costs ($113 billion) were not costs in any real economic sense. It indicated they are transfer payments from wrongdoers to victims. To settle these points of contention, two samples of size 51 were obtained and produced sample standard deviations of $295 and $151.

a. Determine if a two-sample t-distribution can be used to determine if at most half of the tort costs

($113 billion) were not costs in any real economic sense, i.e., the mean tort cost is $886/2.

b. What other requirement must be met before the test indicated in part a can be utilized?

Computer Database Exercises