A Major DVD Rental Chain Is Considering Opening a New

question 122

Multiple Choice

A major DVD 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 DVD players. It conducts a telephone poll of 300 randomly selected households in the area and finds that 96 have DVD players. State the test of interest to the rental chain.

• A) H₀ : π ≤ 0.32 versus H₁ : π > 0.32
• B) H₀ : π ≤ 0.25 versus H₁ : π > 0.25
• C) H₀ : π ≤ 5,000 versus H₁ : π > 5,000
• D) H₀ : μ ≤ 5,000 versus H₁ : μ > 5,000

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Definitions:

External Cost

Costs that a producer or consumer inflicts on a third party who is not involved in the production or consumption of the goods or services.

Economic Efficiency

A situation in which all resources in an economy are optimally distributed to serve each individual or entity in the best way while minimizing waste and inefficiency.

Competitive Market

A competitive market is a market structure characterized by a large number of buyers and sellers, where no single entity has the power to influence market prices significantly.

Free-rider Problem

A situation where individuals benefit from resources, goods, or services that they do not pay for, which can lead to underproduction or depletion of those resources.