Question

The McFarland Insurance Company Claims Department reports the mean cost to process a claim is $60. An industry comparison showed this amount to be larger than most other insurance companies, so the company instituted cost-cutting measures. To evaluate the effect of the cost-cutting measures, the Supervisor of the Claims Department selected a random sample of 26 claims processed last month. He is interested to investigate: At the .01 significance level is it reasonable a claim is now less than $60? Denote μ to be the population mean of processing cost of a claim. How should he set up the null hypothesis (H0)? Group of answer choices

Answer 1

Answer:

Step-by-step explanation:

Hello!

The variable of interest is X: cost to process a claim.

The Supervisor wants to test that "the average cost of claim processing is less than $60", symbolically: μ < 60.

Since this expression doesn't have the equality sign on it, it belongs to the alternative hypothesis. Then the null hypothesis (remember, this is the hypothesis that carries the "no change situation" and always has the = on it) will be the complementary expression, so the statistic hypotheses are:

H₀: μ ≥ 60

H₁: μ < 60

I hope this helps!