The Editor of a Major Academic Book Publisher Claims That

question 70

Essay

The editor of a major academic book publisher claims that a large part of the cost of books is the cost of paper. This implies that larger books will cost more money. As an experiment to analyse the claim, a university student visits the bookstore and records the number of pages and the selling price of 12 randomly selected books. These data are listed below. $$\begin{array} { | c | c | c | } \hline \text { Book } & \text { Number of pages } & \text { Selling price (\$) } \\\hline 1 & 844 & 55 \\\hline 2 & 727 & 50 \\\hline 3 & 360 & 35 \\\hline 4 & 915 & 60 \\\hline 5 & 295 & 30 \\\hline 6 & 706 & 50 \\\hline 7 & 410 & 40 \\\hline 8 & 905 & 53 \\\hline 9 & 1058 & 65 \\\hline 10 & 865 & 54 \\\hline 11 & 677 & 42 \\\hline 12 & 912 & 58 \\\hline\end{array}$$ Can we infer at the 5% significance level that the editor is correct?

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Definitions:

Flotation Costs

The costs associated with issuing new securities, including underwriting, legal, and registration fees, which are incurred by a company when it issues new stocks or bonds.

New Equity

Refers to the issuance of shares by a company to raise capital, which dilutes existing ownership but can provide funds for expansion or debt reduction.

Constant Growth

A steady and unchanging rate at which the value or size of something increases over a specific period.

Flotation Costs

The total costs incurred by a company in issuing new securities, including underwriting, legal, and registration fees.