Question: According to the Federal Trade Commission FTC about 3 4 of
According to the Federal Trade Commission (FTC), about 3.4% of items come up at the wrong price when scanned at the retail checkout counter. Freda Thompson, director of investigations for her state’s consumer affairs office, sets up a study in which she has undercover shoppers (sometimes known as “mystery shoppers”) randomly select and purchase 600 items from Wal-Mart department stores across her state. Suppose that researchers find 15 of the 600 items have been incorrectly priced by the checkout scanner, an error rate of just 2.5%. If Wal-Mart’s overall rate of scanning errors is the same as the rate cited by the FTC, what is the probability that no more than 2.5% of the items purchased by Freda’s investigators would be incorrectly priced when they are scanned? Given the assumed sample result, comment on whether Wal-Mart might be typical of other companies in terms of their error rate for scanning retail items.
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