An entrepreneur owns some land that he wishes to develop. He identifies two development options: build condominiums or build apartment buildings. Accordingly, he reviews public records and derives the following summary measures concerning annual profitability based on a random sample of 30 for each such local business venture. For the analysis, he uses a historical (population) standard deviation of $22,500 for condominiums and $20,000 for apartment buildings.
Condominiums Apartment Buildings
x1 = $244,200..................x2 = $235,800
n1 = 30...................................n2 = 30
a. Set up the hypotheses to test whether the mean profitability differs between condominiums and apartment buildings.
b. Compute the value of the test statistic and the corresponding p-value.
c. At the 5% significance level, what is the conclusion to the test? What if the significance level is 10%?