The Wall Street Journal reported that automobile crashes cost the United States

Question

The Wall Street Journal reported that automobile crashes cost the United States $162 billion annually (The Wall Street Journal, March 5, 2008). The average cost per person for crashes in the Tampa, Florida, area was reported to be $1599. Suppose this average cost was based on a sample of 40 persons who had been involved in car crashes and that the population standard deviation is = $500. What is the margin of error for a 95% confidence interval? Round your answer to two decimal places. What would you recommend if the study required a margin of error of $150 or less?

Explanation / Answer

Solution:-

n = 40, = $500

Z(1 - 0.05/2) = Z(0.975) = ± 1.96

me = ± 1.96*500/sqrt(40) = 154.9516

=> A large sample size would be needed tp reduce the margin of error to $150 or less.

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