This preview shows pages 1–2. Sign up to view the full content.
This preview has intentionally blurred sections. Sign up to view the full version.View Full Document
Unformatted text preview: M4056 Hypothesis Testing: Examples. November 10, 2010 Problem. Tonys Seafood is having a special on 20-pound packages of frozen shrimp. The shrimp come in two sizes: jumbo (12 to the pound) and large (16 to the pound). You figure the jumbo are a good deal, but not the large. Unfortunately, the packages are not marked. Fortunately, the sales clerk will weigh four shrimp from the package you select, at your request. How can you use this information to decide whether or not to buy? (Assume both kinds of shrimp are normally distributed by weight, with a standard deviation of 1 / 4 ounce.) Solution. Presumably, purchasing a package of large shrimp entails a loss, which you wish to avoid. To make this vivid, imagine the following scenario: Jumbo shrimp are selling at Franks Seafood for $3.20 per pound and large for $2.80. Tonys is selling 20-pound packs for $60.00 each, but you have to purchase without being sure of the size of the shrimp in the pack, so if you purchase from Tony, you risk losing $4.00, the difference in price between 20 pounds of large shrimp purchased from Frank and 20 pounds from Tony. You decide this risk is tolerable if you can decrease the probability to 1...
View Full Document
This note was uploaded on 11/29/2011 for the course MATH 4056 taught by Professor Staff during the Fall '08 term at LSU.
- Fall '08