Q; Americans have become increasingly concerned about the rising cost of Medicare. In 1990, the average annual Medicare spending per enrollee was $3267; in 2003, the average annual Medicare spending per enrollee was $6883 (Money, Fall 2003). Suppose you hired a consulting firm to take a sample of fifty 2003 Medicare enrollees to further investigate the nature of expenditures. Assume the population standard deviation for 2003 was $2000. a. Show the sampling distribution of the mean amount of Medicare spending for a sample of fifty 2003 enrollees. b. What is the probability the sample mean will be within 0+$300 of the population mean? cc. What is the probability the sample mean will be greater than $7500? If the consulting firm tells you thegreater than $7500? If the consulting firm tells you the sample mean for the Medicare enrollees they interviewed was $7500, would you question whether they followed correct simple random sampling procedures? Why or why not? | Sarah Schrijvers. 50% Given: a. Sinco the sample is large (sample size of 30 or more}, the central limit, theorem tells us that the sampling distribution of the sample mean isapproximately normal The sampling distribution of the sample mean F has mean jt = 6883 and o standard deviation = = 282.83. va06034471 6317.14 6600157 6883 7165843 7448686 7731 529 “The zacore is the value decreased by the menn, divided by the standard £300 200 / V0 ~ 7500 — 6883 2000/50 ~ Determine the corresponding probability using table 3(a) in the appendix: 06 28 Determine the corresroncling probability using table 3(a) in the appends b P(\2-p| < 800) = P(-1.06 « + < 1.06) = 1-2P(s < ~1.06) = 1-2(0.1446) = 0.7108 P(x > 7500) = P(s > 2.18) = 1 ~ P(e < 2.18) =1 0.9854 = 0.0146 ‘You would questiou if they followed corvect simple rendom sampling, beesuse it is oxtromoly unlikely to obtain this random sample by chance. 1. See graph. b, 0.7108 ©. 0.0146, Yes