An accounting firm is considering offering investment advice in addition to its

Question

An accounting firm is considering offering investment advice in addition to its current focus on tax planning. Its analysis of the costs and benefits of adding this service indicate that it will be profitable if 40% or more of its current customer base use it. The firm plans to survey its customers. Let p denote the proportion of its customers who will use this service if offered, and let p denote the proportion who say in a survey that they will use this service. The firm does not want to invest in this expansion unless data show that it will be profitable. Determine whether the following statement is true or false. If the statement is false, explain why it is false.

If the H0 holds, then p in the sample will be less than 0.4.

Choose the correct answer below.

A. True

B. False, because if the H0 holds, then p in the sample will be greater than or equal to 0.4.

C. False, because of sampling variablity.

D. False, because if the H0 is rejected, then p in the sample will be less than 0.4.

Explanation / Answer

B. False, because if the H0 holds, then p in the sample will be greater than or equal to 0.4.

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