Let?s say the average per capita annual health care cost for mid-size US-based corporations is $5,886. An organization competing for business has funded several health maintenance organizations (HMOs). A sample of their average annual costs per person is as follows:

The hypothesis is that HMOs are an improvement. Are they?

a) State the appropriate null hypothesis and alternative hypothesis. Explain how you obtain your answer.

b) Calculate the mean, standard error, and t-statistic.

c) If you want to be 95% confident in your decision, what rejection region should you use? Explain how you obtain your answer.

d) What is the p- value associated with the test statistic? How do you interpret this? Explain how you obtain your answer.

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