The average cost of tuition plus 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 is $8,500 per term, and the alternative hypothesis is that the average cost is higher. 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 to the right of 2.04, which is 0.0000.

The Average Cost of Tuition Plus Room and Board at Small