The average cost of tuition and room and board at small private liberal arts colleges is reported to be $8,500 per term, but a financial administrator believes that the average cost is higher. A study conducted using 350 small liberal arts colleges showed that the average cost per term is $8,745. The population standard deviation is $1,200. Let α = 0.05. What is the p-value for this test?
A)0.0000
B)0.0124
C)0.0500
D)0.4938

Question

Quizplus · Accepted Answer

The p-value is the probability of getting a test statistic as extreme as or more extreme than the one observed, assuming the null hypothesis is true. In this case, the null hypothesis is that the average cost of tuition and room and board at small private liberal arts colleges is $8,500 per term. The test statistic is the z-score, which is calculated as (8,745 - 8,500) / 1,200 = 2.04. The p-value is the area under the standard normal distribution curve to the right of 2.04, which is 0.0000.

The Average Cost of Tuition and Room and Board at Small