EC/315 Midterm Examination
Name
Directions:
This test is openbook and open notes and covers the content from weeks 1 through week
4 of EC/315.
The test will be typed and submitted in the Dropbox marked Midterm
Exam. The midterm is due the last day of Week 4.
PROBLEM 1 (Weight 20 points).
NBC TV news, in a segment on the price of gasoline, reported last evening that the
mean price nationwide is $1.50 per gallon for selfserve regular unleaded. A random
sample of 35 stations in the Milwaukee, WI, area revealed that the mean price was
$1.52 per gallon and that the standard deviation was $0.05 per gallon. At the .05
significance level, can we conclude that the price of gasoline is higher in the Milwaukee
area? Calculate the
p
value and interpret.
Hypotheses:
H
0
:
≤ 1.5
HA:
> 1.5
Significance Level:
α
= 0.05, as per the question.
Test Statistic:
Since the sample size is greater than 30, we can use the z test
z = (  µ) / (σ/√n)
z = (1.52  1.5 ) / (0.05/√35)
z = 0.02 / (0.05/5.9161)
z = 2.3664
Decision Rule:
Using Excel, onetailed p = 0.009
Reject H
0
 the mean price of gasoline is greater than $1.50.
P value = 2(0.5000 – 0.4911) = 2(0.0089) =
0.0178
Decision Summary:
Since p < alpha 0.05, there is sufficient evidence to reject the null hypothesis. The mean
price is higher in Milwaukee.
The probability of drawing a sample of 35 when the mean is ≥ $1.52, from a population
with a mean of $1.50 is 0.0178.
This is far below the 0.05 level of significance. We
reject the null hypothesis and conclude that the price of gas is higher in the Milwaukee
area.
PROBLEM 2: (Weight 20 points)
.
This preview has intentionally blurred sections. Sign up to view the full version.
View Full Document
Suppose Babsie generated the following probability
distribution:
X
p(x)
5
.25
7
.30
10
.25
12
.05
15
.15
a.
Is this probability distribution discrete or continuous? Explain your
This is the end of the preview.
Sign up
to
access the rest of the document.
 Spring '10
 BARCUS
 Normal Distribution, Standard Deviation, Null hypothesis, Milwaukee

Click to edit the document details