One of the Major U

question 98

Multiple Choice

One of the major U.S. tire makers wishes to review its warranty for their rainmaker tire. The warranty is for 40,000 miles. The tire company believes that the tire actually lasts more than 40,000 miles with a standard deviation of 15,000 miles. A sample 49 tires revealed that the mean number of miles is 45,000 miles. Test the hypothesis with a 0.05 significance level.

• A) At a 5% level of significance, our decision is to reject the null hypothesis. The tires last more than 40 000 miles.
• B) At a 5% level of significance, our decision is to accept the null hypothesis. The tires last 40,000 miles.
• C) At a 5% level of significance, we should have used the t-test, rather than the z-test.

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Definitions:

Total Cost

The complete expenditure incurred for producing or offering a product or service, including fixed and variable costs.

Competitive Factor Markets

Refers to markets where factors of production (such as labor, capital) are bought and sold in a competitive environment, ensuring prices are influenced by supply and demand.

Production Function

An equation that describes the relationship between inputs (like labor and capital) and the maximum output that can be produced with those inputs.

Prices

The monetary value assigned to goods, services, or commodities, determining the amount a consumer pays to acquire them.