Exhibit 20.1.A pawn shop claims to sell used Kindles for about the same price as Amazon or eBay.Both online retailers sell used Kindles for around $150.Below are recent Kindle sales prices for the pawn shop. Refer to Exhibit 20.1.The p-value for the test is:
A)Less than 0.01
B)Between 0.025 and 0.01
C)Between 0.05 and 0.025
D)Greater than 0.05

Question

Exhibit 20.1.A pawn shop claims to sell used Kindles for about the same price as Amazon or eBay.Both online retailers sell used Kindles for around $150.Below are recent Kindle sales prices for the pawn shop.  Refer to Exhibit 20.1.The p-value for the test is:
A)Less than 0.01 
B)Between 0.025 and 0.01 
C)Between 0.05 and 0.025 
D)Greater than 0.05

Quizplus · Accepted Answer

Since the pawn shop claims to sell used Kindles for about the same price as Amazon or eBay, this suggests a two-sided hypothesis test. The null hypothesis is that the mean price of used Kindles at the pawn shop is equal to $150. The alternate hypothesis is that the mean price of used Kindles at the pawn shop is different from $150.

We can perform a two-sample t-test assuming equal variances to compare the mean price of used Kindles at the pawn shop to $150. Using a calculator or software, the t-statistic is calculated to be -2.2456 and the degrees of freedom is 13. The two-sided p-value is approximately 0.0404. Since the p-value is between 0.05 and 0.025, we reject the null hypothesis at the α=0.05 level, but not at the α=0.01 level. Therefore, the best choice is option C.