Annual expenditures for prescription drugs was $838 per personin the Northeast of the country. A sample of 60 individuals in theMidwest showed a per person annual expenditure for prescriptiondrugs of $745. Suppose the population standard deviation is $300.Follow the steps below to develop a hypothesis test to determinewhether the sample data support the conclusion that the populationannual expenditure for prescription drugs per person is lower inthe Midwest than in the Northeast.
- Formulate the null and alternative hypotheses.Ă‚Â Ă‚Â Statewhether this is a one-tailed test (and if so, upper or lower tail)or a two-tailed test.
- Suppose the significance level is . Explain what thismeans.
- Calculate the test statistic. (Hint: Is  known orunknown?)
- Calculate the p-value and make a decision to eitherreject  or to fail to reject .
- Calculate the critical value(s). Use the test statistic then tomake a decision to either reject  or to fail to reject.
- State what your decision means in the contextof the problem (prescription expenditure in the Midwest vs. theNortheast).
