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ADD DEGREES OF FREEDOM A health policy economist interested in investigating the relationship between the cost of prescription drugs in Canada and the cost of

ADD DEGREES OF FREEDOM

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A health policy economist interested in investigating the relationship between the cost of prescription drugs in Canada and the cost of prescription drugs in the United States has information from a random sample of $3 prescription drugs sold in both countries. For each of these drugs, the economist is examining two pieces of information: the average cost of a one- D month supply of the drug in Canada, and the average cost of a one-month supply of the drug in the United States. For the sample of drugs examined, the sample correlation coefficient , relating these two pieces of information is 0.21. Test for a significant linear relationship between the two variables average prescription drug cost in Canada and average prescription drug cost in the United States by doing a hypothesis test regarding the population correlation coefficient p. (Assume that the two variables have a bivariate normal distribution.) Use the 0.05 level of significance, and perform a two- tailed test. Then complete the parts below. (If necessary, consult a list of formulas.) (a) State the null hypothesis Ho and the alternative hypothesis H. Ho : D X H :0 (b) Determine the type of test statistic to use. (Choose one) V (c) Find the value of the test statistic. (Round to three or more decimal places.) X (d) Find the p-value. (Round to three or more decimal places.) e) Based on the data, can the economist conclude (using the 0.05 level) that there is a significant linear relationship between the average prescription drug cost in Canada and the average prescription drug cost in the United States? Yes No

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