TABLE 9-4 A Drug Company Is Considering Marketing a New Local Anesthetic

question 106

Multiple Choice

TABLE 9-4
A drug company is considering marketing a new local anesthetic. The effective time of the anesthetic the drug company is currently producing has a normal distribution with an mean of 7.4 minutes with a standard deviation of 1.2 minutes. The chemistry of the new anesthetic is such that the effective time should be normally distributed with the same standard deviation, but the mean effective time may be lower. If it is lower, the drug company will market the new anesthetic; otherwise, they will continue to produce the older one. A sample of size 36 results in a sample mean of 7.1. A hypothesis test will be done to help make the decision.
-Referring to Table 9-4, the appropriate hypotheses are:

• A) H₀ : μ = 7.4 versus H₁ : μ ≠ 7.4
• B) H₀ : μ ≤ 7.4 versus H₁ : μ > 7.4
• C) H₀ : μ ≥ 7.4 versus H₁ : μ < 7.4
• D) H₀ : μ > 7.4 versus H₁ : μ ≤ 7.4

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Definitions:

Retained Earnings

The portion of net income not distributed as dividends but retained by the company to reinvest in its business or to pay debt.

Net Income

The final income of a firm following the deduction of all expenditures, taxes, and interest from the gross revenue.

Dividends

Payments made by a corporation to its shareholder members, usually as a distribution of profits.

Income Statement

A financial statement that shows a company's revenues and expenses over a specific period, revealing profit or loss.