Problems on inference about mean and proportion:

1. Studies show that massage therapy has a variety of health benefits and it is not too expensive (the
Wall Street Journal, March 13, 2012). A sample of 10 typical massage therapy sessions showed an
average charge of $59. The population standard deviation for a session is $5.50.
a) What assumptions about the population should we make if a margin of error is desired?
b) Using 95% confidence, what is the margin of error?
c) Using 99% confidence, what is the margin of error?
2. Costs are rising for all kinds of medical care. The mean monthly rent at assisted-living facilities was
reported to have increased 17% over the last five years to $3486 (the Wall Street Journal, October
27, 2012). Assume this cost estimate is based on a sample of 120 facilities and, from past studies, it
can be assumed that the population standard deviation is s = $650.
a) Develop a 90% confidence interval estimate of the population mean monthly rent.
b) Develop a 95% confidence interval estimate of the population mean monthly rent.
c) Develop a 99% confidence interval estimate of the population mean monthly rent.
d) What happens to the width of the confidence interval as the confidence level is increased?
Does this seem reasonable? Explain.
3. The 92 million Americans of age 50 and over control 50 percent of all discretionary income. AARP
estimates that the average annual expenditure on restaurants and carryout food was $1873 for
individuals in this age group. Suppose this estimate is based on a sample of 80 persons and that the
sample standard deviation is $550.
a) At 95% confidence, what is the margin of error?
b) What is the 95% confidence interval for the population mean amount spent on restaurants
and carryout food?
c) What is your estimate of the total amount spent by Americans of age 50 and over on
restaurants and carryout food?
d) If the amount spent on restaurants and carryout food is skewed to the right, would you
expect the median amount spent to be greater or less than $1873?
4. Sales personnel for Skillings Distributors submit weekly reports listing the customer contacts
made during the week. A sample of 65 weekly reports showed a sample mean of 19.5 customer
contacts per week. The sample standard deviation was 5.2. Provide 90% and 95% confidence
intervals for the population mean number of weekly customer contacts for the sales personnel.

5. The U.S. Energy Information Administration (US EIA) reported that the average price for a gallon
of regular gasoline is $3.94 (US EIA website, April 6, 2012). The US EIA updates its estimates of
average gas prices on a weekly basis. Assume the standard deviation is $0.25 for the price of a gallon
of regular gasoline and recommend the appropriate sample size for the US EIA to use if they wish to
report each of the following margins of error at 95% confidence.
a) The desired margin of error is $0.10.
b) The desired margin of error is $0.07.
6. A special industrial battery must have a life of at least 400 hours. A hypothesis test is to be
conducted with a 0.02 level of significance. If the batteries from a particular production run have an
actual mean use life of 385 hours, the production manager wants a sampling procedure that only
10% of the time would show erroneously that the batch is acceptable. What sample size is
recommended for the hypothesis test? Use 30 hours as an estimate of the population standard
deviation.

7. Customers arrive at a movie theatre at the advertised movie time only to find that they have to sit
through several previews and pre-preview ads before the movie starts. Many complain that the time
devoted to previews is too long. A preliminary sample conducted by the Wall Street Journal showed
that the standard deviation of the amount of time devoted to previews was 4 minutes. Use that as a
planning value for the standard deviation in answering the following questions.
a) If we want to estimate the population mean time for previews at movie theatres with a
margin of error of 75 seconds, what sample size should be used? Assume 95% confidence.
b) Suppose that for a sample of 120 movies, the sample mean of the previews is 6 minutes and
35 seconds. Estimate a 99% confidence interval for the population mean time for previews
at movie theatres.
8. There has been a trend toward less driving in the last few years, especially by young people. From
2001 to 2009 the annual vehicle miles travelled by people from 16 to 34 years of age decreased from
10,300 to 7900 miles per person. Assume the standard deviation was 2000 miles in 2009. Suppose
you would like to conduct a survey to develop a 95% confidence interval estimate of the annual
vehicle-miles per person for people 16 to 34 years of age at the current time. A margin of error of
100 miles is desired. How large a sample should be used for the current survey?

9. For many years businesses have struggled with the rising cost of health care. but recently, the
increases have slowed due to less inflation in health care prices and employees paying for a larger
portion of health care benefits. A recent Mercer survey showed that 52% of U.S. employers were
likely to require higher employee contributions for health care coverage in 2009. Suppose the survey
was based on a sample of 800 companies. Compute the margin of error and a 95% confidence
interval for the proportion of companies likely to require higher employee contributions for health
care coverage in 2009.

10. A poll for the presidential campaign sampled 491 potential voters in June. A primary purpose of
the poll was to obtain an estimate of the proportion of potential voters who favoured each
candidate. Assume a planning value of 𝑝 = 0.5 and a 95% confidence level.
a) For 𝑝 = 0.5, what was the planned margin of error for the June poll?
b) Closer to the November election, better precision and smaller margins of error are desired.
Assume the following margins of error are requested for surveys to be conducted during the
presidential campaign. Compute the recommended sample size for each survey.
Survey Margin of Error
September 0.04
October 0.03
Early November 0.02
Pre-Election Day 0.01

11. The Pew Research Centre Internet Project, conducted on the 25th anniversary of the Internet,
involved a survey of 857 Internet users (Pew Research Centre website, April 1, 2014). It provided a
variety of statistics on Internet users. For instance, in 2014, 87% of American adults were Internet
users. In 1995 only 14% of American adults used the Internet.
a) The sample survey showed that 90% of respondents said the Internet has been a good thing
for them personally. Develop a 95% confidence interval for the proportion of respondents
who say the Internet has been a good thing for them personally.
b) If 67% of Internet users agree that the Internet has strengthened their relationship with
family and friends, find a 95% confidence interval for the population proportion of people
believing the same.
c) Fifty-six percent of Internet users have seen an online group come together to help a person
or community solve a problem. Develop a 95% confidence interval for the proportion of
Internet users who say online groups have helped solve a problem.
d) How are the margin of errors in the above three parts related to the sample proportions?
12. The manager of an automobile dealership is considering a new bonus plan designed to increase
sales volume. Currently, the mean sales volume is 14 automobiles per month. The manager wants to
conduct a research study to see whether the new bonus plan increases sales volume. To collect data
on the plan, a sample of sales personnel will be allowed to sell under the new bonus plan for a one-
month period. Develop the null and alternative hypothesis most appropriate for this situation.

13. A production line operation is designed to fill cartons with laundry detergent to a mean weight of
32 ounces. In order to check the efficiency and accuracy of the production line, the manager decided
to take a sample of 100 cartons and weighed them. Suppose, the mean of the weights of the sample
observations is 31.97 ounces. Assume that the population standard deviation of the mean filling
weights is 0.17 ounces.
a) Formulate the null and alternative hypotheses that will help in deciding whether to shut
down and adjust the production line.
b) Is there enough evidence to say that the production line is not operating correctly?
14. Because of high production-changeover time and costs, a director of manufacturing must
convince management that a proposed manufacturing method reduces costs before the new
method can be implemented. the current production method operates with a mean cost of $220 per
hour. A research study will measure the cost of the new method over a sample production period.
a. Develop the null and alternative hypotheses most appropriate for this study.
b. Comment on the conclusion when 𝐻! cannot be rejected.

15. Duke energy reported that the cost of electricity for an efficient home in a particular
neighbourhood of Cincinnati, Ohio, was $104 per. A researcher believes that the cost of electricity
for a comparable neighbourhood in Chicago, Illinois, is higher. A sample of homes in this Chicago
neighbourhood will be taken and the sample mean monthly cost of electricity will be used to test the
following null and alternative hypotheses.
𝐻! : µ ≤ 104
𝐻" : µ > 104
a) Assume the sample data led to rejection of the null hypothesis. What would be your
conclusion about the cost of electricity in the Chicago neighbourhood?
b) What is the Type I error in this situation? What are the consequences of making this error?

16. The label on a 3-quart container of orange juice states that the orange juice contains an average
of 1 gram of fat or less. Answer the following questions for a hypothesis test that could be used to
test the claim on the label.
a) Develop the appropriate null and alternative hypotheses.
b) What is the Type I error in this situation? What are the consequences of making this error?
c) What is the Type II error in this situation? What are the consequences of making this error?
17. Carpetland salespersons average $8000 per week in sales, with a standard deviation of $500.
Steve Contois, the firm’s vice president, proposes a compensation plan with new selling incentives.
Steve hopes that the results of a trial selling period will enable him to conclude that the
compensation plan increases the average sales per salesperson. He selects 200 salespersons
randomly to test his theory. He decides that he will consider the plan to be successful if the average
sales per week for those 200 selected exceeds $8500.
a) Develop the appropriate null and alternative hypotheses.
b) Find the probability of making Type I error in this situation?
c) Does the above test procedure seem sensible to you?
18. Individuals filing federal income tax returns prior to March 31 received an average refund of
$1056. Consider the population of “last-minute” filers who mail their tax return during the last five
days of the income tax period (typically April 10 to April 15).
 a) A researcher suggests that a reason individuals wait until the last five days is that on average
these individuals receive lower refunds than the early filers. Develop appropriate
hypotheses such that rejection of the null will support the researcher’s contention.
b) For a sample of 400 individuals who filed a tax return between April 10 and 15, the sample
mean refund was $910. Based on prior experience a population standard deviation of $1600
may be assumed. What is the p-value of the test?
c) At α = 0.05, what is your conclusion?
d) Repeat the preceding hypothesis test using the critical value approach.
19. The mean hourly wage for employees in goods-producing industries is currently $24.57. Suppose
we take a sample of employees from the manufacturing industry to see if the mean hourly wage
differs from the reported mean of $24.57 for the goods-producing industries.
a) State the null and alternative hypotheses we should use to test the above.
b) Suppose a sample of 30 employees showed a sample mean of $23.89 per hour. Assume a
population standard deviation of $2.40 per hour and compute the p-value.
c) At 5% level of significance, what is your conclusion?
d) Repeat the preceding hypothesis test using the critical value approach.
20. Which is cheaper: eating out or dining in? The mean cost of a flank steak, broccoli, and rice
bought at the grocery store is $13.04. A sample of 100 neighbourhood restaurants showed a mean
price of $12.75 and a standard deviation of $2 for a comparable restaurant meal.
a) Develop appropriate hypotheses for a test to determine whether the sample data support
that the mean cost of a restaurant meal is less than fixing a comparable meal at home.
b) Using the sample from the 100 restaurants, what is the p-value?
c) At α = 0.05, what is your conclusion?
d) Repeat the preceding hypothesis test using the critical value approach.
21. CCN and ActMedia provided a television channel targeted to individuals waiting in supermarket
checkout lines. The channel showed news, short features, and advertisements. The length of the
program was based on the assumption that the population mean time a shopper stands in a
supermarket checkout line is 8 minutes. A sample of actual waiting times will be used to test this
assumption and determine whether actual mean waiting time differs from this standard.
a) Formulate the hypotheses for this application.
b) A sample of 120 shoppers showed a sample mean waiting time of 8.4 minutes. Assume a
population standard deviation of 3.2 minutes. What is the p-value?
c) At 5% level of significance, what is your conclusion?
d) Compute a 95% confidence interval for the population mean. Does it support your
conclusion?
22. Joan’s nursery specializes in custom-designed landscaping for residential areas. The estimated
labor cost associated with a particular landscaping proposal is based on the number of plantings of
trees, shrubs, and so on to be used for the project. For cost-estimating purposes, managers use two
hours of labor time for the planting of a medium-sized tree. Actual times from a sample of 10
plantings during the past month follow (times in hours) is as follows:

1.7 1.5 2.6 2.2 2.4

With a 0.05 level of significance, test whether the mean tree-planting time differs from two hours.

23. The Coca-Cola company reported that the mean per capita annual sales of its beverages in the
United States was 423 eight-ounce servings. Toby is curious whether the consumption of Coca-Cola
beverages is higher in Atlanta, the location of Coca-Cola headquarters. A sample of 36 individuals
from the Atlanta area showed a sample mean annual consumption of 460.4 eight-ounce servings
with a standard deviation of 101.9 ounces. At 5% level of significance, does the data support the
hypothesis that that mean annual consumption of Coca-Cola products is higher in Atlanta?

24. A study by Consumer Reports showed that 64% of supermarket shoppers believe supermarket
brands to be as good as national name brands. To investigate whether this result applies to its own
product, the manufacturer of a national name-brand ketchup asked a sample of shoppers whether
they believed that supermarket ketchup was as good as the national brand ketchup.
a) Formulate the hypotheses that could be used to determine whether the percentage of
supermarket shoppers who believe that the supermarket ketchup was as good as the
national brand ketchup differed from 64%.
b) If a sample of 100 shoppers showed 52 stating that the supermarket brand was as good as
the national brand, what is the p-value?
c) What is your conclusion about the hypothesis?
d) Should the national brand ketchup manufacturer be pleased with this conclusion?

25. Last year, 46% of business owners gave a holiday gift to their employees. A survey of business
owners conducted this year indicates that 35% plan to provide a holiday gift to their employees.
Suppose the survey results are based on a sample of 60 business owners.
a) Compute the p-value for a hypothesis test that can be used to determine if the proportion of
business owners providing holiday gifts had decreased from last year.
b) Using a 0.05 level of significance, would you conclude that the proportion of business
owners providing gifts decreased? What is the smallest level of significance for which you
could draw such a conclusion?
26. According to the university of Nevada Center for logistics Management, 6% of all merchandise
sold in the United States gets returned. A Houston department store sampled 80 items sold in
January and found that 12 of the items were returned.
a) Construct a point estimate of the proportion of items returned for the population of sales
transactions at the Houston store.
b) Construct a 95% confidence interval for the proportion of returns at the Houston store.
c) Is the proportion of returns at the Houston store significantly different from the returns for
the nation as a whole? Provide statistical support for your answer.
27. The American Association of individual investors conducts a weekly survey of its members to
measure the percent who are bullish, bearish, and neutral on the stock market for the next six
months. For the week ending November 7, 2012, the survey results showed 38.5% bullish, 21.6%
neutral, and 39.9% bearish. Assume that these results are based on a sample of 300 members.
a) Over the long term, the proportion of bullish AAII members is 0.39. Conduct a hypothesis
test at the 5% level of significance to see if the current sample results show that bullish
sentiment differs from its long-term average of 0.39. What are your findings?
b) Over the long term, the proportion of bearish AAII members is 0.30. Conduct a hypothesis
test at 1% level of significance to see if the current sample results support that.
c) Would you feel comfortable extending these results to all investors? Why or why not?
28. Fowle Marketing research, Inc., bases charges to a client on the assumption that telephone
surveys can be completed within 15 minutes or less. With a sample of 35 surveys, a population
standard deviation of 4 minutes, and a level of significance of 0.01, the sample mean will be used to
test the null hypothesis 𝐻! : 𝜇 = 15 against the alternate 𝐻" : 𝜇 > 15.
a) Find an appropriate rejection region to test the above.
b) What is your interpretation of the Type II error for this test? What is its impact on the firm?
c) What is the probability of making a Type II error if the actual mean time is 𝜇 = 17 minutes?
d) What is the probability of making a Type II error if the actual mean time is 𝜇 = 18 minutes?
 e) Sketch the general shape of the power curve for this test.
29. A consumer research group is interested in testing an automobile manufacturer’s claim that a
new economy model will travel at least 25 miles per gallon of gasoline. With a 0.02 level of
significance and a sample of 30 cars, what is the rejection rule to determine whether the
manufacturer’s claim should be rejected?

30. Young adult magazine states the following hypotheses about the mean age of its subscribers.
𝐻! : 𝜇 = 28, 𝐻" : 𝜇 ≠ 28. To analyze the claim, Jim decides to take a sample of 100 subscribers and to
reject the null hypothesis if the sample mean is above 30. The population standard deviation is
assumed to be 6 years.
a) What would it mean to make a Type II error in this situation?
b) At 5% level of significance, what is the probability of accepting the null hypothesis if true
value of µ is equal to 29?
c) What is the power of the test at µ = 26?
d) If Jim wants to permit a maximum of 15% probability of making a Type II error at 5% level of
significance when the true mean age is 29, what sample size should be selected?
e) Does the test procedure look sensible to you?