A major videocassette rental chain is considering opening a new store in an area that currently does not have any such stores. The chain will open if there is evidence that more than 5,000 of the 20,000 households in the area are equipped with videocassette recorders (VCRs). It conducts a telephone poll of 300 randomly selected households in the area and finds that 96 have VCRs. The rental chain's conclusion from the hypothesis test using a 3% level of significance is
A) not to open a new store.
B) to open a new store.
C) to delay opening a new store until additional evidence is collected.
D) We cannot tell what the decision should be from the information given.

Question

Quizplus · Accepted Answer

The sample proportion of households with VCRs is 96/300 = 0.32. The sample size is 300, which is large enough to use the normal distribution to approximate the sampling distribution of the sample proportion. The standard error of the sample proportion is sqrt(0.32 * 0.68 / 300) = 0.03. The z-score for the sample proportion is (0.32 - 0.25) / 0.03 = 2.33. The p-value for the hypothesis test is the area under the standard normal distribution to the right of 2.33, which is 0.01. Since the p-value is less than the level of significance of 0.03, the rental chain concludes that there is evidence that more than 5,000 of the 20,000 households in the area are equipped with VCRs and decides to open a new store.

A Major Videocassette Rental Chain Is Considering Opening a New