As part of their business promotional package, the Milwaukee Chamber of Commerce would like an estimate of the mean cost per month to lease a one-bedroom apartment. The mean cost per month for a random sample of 40 apartments currently available for lease was $884. The standard deviation of the sample was $50. a. Develop a 98% confidence interval for the population mean. b. Would it be reasonable to conclude that the population mean is $950 per month

a)    

So on this case the 98% confidence interval would be given by (864.82;903.179)

b) For this case the upper bound of the confidence interval is lower than 950 so we don't have a significant evidence to conclude that the true mean is 950 per month

Step-by-step explanation:

Previous concepts

A confidence interval is "a range of values that’s likely to include a population value with a certain degree of confidence. It is often expressed a % whereby a population means lies between an upper and lower interval".

The margin of error is the range of values below and above the sample statistic in a confidence interval.

Normal distribution, is a "probability distribution that is symmetric about the mean, showing that data near the mean are more frequent in occurrence than data far from the mean".

represent the sample mean

population mean (variable of interest)

s=50 represent the sample standard deviation

n=40 represent the sample size  

Solution to the problem

Part a

The confidence interval for the mean is given by the following formula:

  (1)

In order to calculate the critical value we need to find first the degrees of freedom, given by:

Since the Confidence is 0.98 or 98%, the value of and , and we can use excel, a calculator or a table to find the critical value. The excel command would be: "=-T.INV(0.01,39)".And we see that

Now we have everything in order to replace into formula (1):

So on this case the 98% confidence interval would be given by (864.82;903.179)

Part b

For this case the upper bound of the confidence interval is lower than 950 so we don't have a significant evidence to conclude that the true mean is 950 per month

it is probably the graph on the bottom right.