A health insurer has determined that the "reasonable and customary" fee for a certain medical procedure is $$1200.\$ 1200 .$ They suspect that the average fee charged by one particular clinic for this procedure is higher than $$1200.\$ 1200 .$ The insurer wants to perform a hypothesis test to determine whether their suspicion is correct.

A) Lower-tailed
B) Two-sided
C) Upper-tailed

Question

A health insurer has determined that the "reasonable and customary" fee for a certain medical procedure is

$1200.\$ 1200 .

They suspect that the average fee charged by one particular clinic for this procedure is higher than

$1200.\$ 1200 .

The insurer wants to perform a hypothesis test to determine whether their suspicion is correct.

A) Lower-tailed
B) Two-sided
C) Upper-tailed

Elareera Asdecxz · Accepted Answer

Final Answer : C, Explanation :  An upper-tailed test is appropriate in this scenario as the insurer suspects that the average fee charged by the clinic is higher than the reasonable and customary fee. Therefore, the null hypothesis would be that the average fee charged by the clinic is less than or equal to  , while the alternative hypothesis would be that the average fee charged by the clinic is greater than . This means that the critical region will be located in the upper tail of the distribution of sample means, and the p-value will be the probability of obtaining a sample mean as extreme or more extreme than the sample mean that was actually observed, assuming that the null hypothesis is true.

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