Question

SCG&E reported that the cost of electricity for an efficient home in Charleston, SC was $125 per month. A researcher believes that the cost of electricity for a comparable neighborhood in Charlotte, NC is lower A sample of homes in Charlotte is taken to test the following hypotheses.

H₀: µ ≥ $125

H_a: µ < $125

1. Assume that the sample data resulted in the rejection of the null hypothesis. What would be your conclusion about the cost of electricity in the Charlotte neighborhood?
2. What is the Type I error in this situation? What are the consequences of making this error?
3. What is the Type II error in this situation? What are the consequences of making this error?

Answer 1

Ans:

As,the null hypothesis is rejected,we can conclude that the cost of electricity for an efficient home in Charleston, SC is less than $125 per month.

We will commit type I error,when we conclude that cost of electricity per month is less than 125 per month,but in fact, it is 125 per month.In this case,you will underestimate your electricity budget and at last you will pay more.

We will commit type II error,when we conclude that cost of electricity per month is 125 per month,but in fact, it is less than 125 per month.In this case,you will overestimate your electricity budget and at last you will pay less.