Using the 7 steps of Hypothesis testing Step 1: Develop the null and alternative hypothesis

Step 2: State alpha

Step 3: Compute test statistics

Step 4: Compute the p- value or critical value

Step 5: State the rejection rule

Step 6: Determine whether to reject Ho.

Step 7: Make conclusion

1) Eagle Outfitters is a chain of stores specializing in outdoor apparel and camping gear. They are considering a promotion that involves mailing discount coupons to all their credit card customers. This promotion will be considered a success if more than 10% of those receiving the coupons use them. Before going national with the promotion, coupons were sent to a sample of 100 credit card customers. a. Develop hypotheses that can be used to test whether the population proportion of those who will use the coupons is sufficient to go national. b. The file Eagle contains the sample data. Develop a point estimate of the population proportion. c. Use = .05 to conduct your hypothesis test. Should Eagle go national with the promotion?

2) Annual per capita consumption of milk is 21.6 gallons (Statistical Abstract of the United States: 2006). Being from the Midwest, you believe milk consumption is higher there and wish to support your opinion. A sample of 16 individuals from the midwestern town of Webster City showed a sample mean annual consumption of 24.1 gallons with a standard deviation of s=4.8. a. Develop a hypothesis test that can be used to determine whether the mean annual consumption in Webster City is higher than the national mean. b. What is a point estimate of the difference between mean annual consumption in Webster City and the national mean? c. At = .05, test for a significant difference. What is your conclusion?

3)The cost of a one-carat VS2 clarity, H color diamond from Diamond Source USA is $5600 (Diamond Source website, March 2003). A midwestern jeweler makes calls to contacts in the diamond district of New York City to see whether the mean price of diamonds there dif- fers from $5600. a. Formulate hypotheses that can be used to determine whether the mean price in New York City differs from $5600. b. A sample of 25 New York City contacts provided the prices shown in the file named Diamonds. What is the p-value? c. At = .05, can the null hypothesis be rejected? What is your conclusion? d. Repeat the preceding hypothesis test using the critical value approach. 4) Wall Street securities firms paid out record year-end bonuses of $125,500 per employee for 2005 (Fortune, February 6, 2006). Suppose we would like to take a sample of employees at the Jones & Ryan securities firm to see whether the mean year-end bonus is different from the reported mean of $125,500 for the population. a. State the null and alternative hypotheses you would use to test whether the year-end bonuses paid by Jones & Ryan were different from the population mean. b. Suppose a sample of 40 Jones & Ryan employees showed a sample mean year-end bonus of $118,000. Assume a population standard deviation of $30,000 and com- pute the p-value. c. With = .05 as the level of significance, what is your conclusion? d. Repeat the preceding hypothesis test using the critical value approach.