Question

If manufacturer would like to minimise the probability of rejecting the null
hypothesis when it is in fact true, which level of significance would you recommend, the
1 percent or the 5 percent significance level? Explain why.

Answer 1

THE PROBABILITY OF REJECTING THE NULL HYPOTHESIS WHEN IT IS TRUE , THAT IS , REJECTION OF THE TRUE NULL HYPOTHESIS , WHICH IS THE TYPE I ERROR .

AND PROBABILITY OF TYPE I ERROR IS EQUAL TO ALPHA(LEVEL OF SIGNIFICANCE).

SO, TO MINIMISE THE THE PROBABILITY OF REJECTING THE NULL HYPOTHESIS WHEN IT IS TRUE WE SHOULD USE LOW LEVEL OF SIGNIFICANCE , THAT IS , BETWEEN 1 PERCENT AND 5 PERCENT ,WE SHOULD USE 1 PERCENT .

AND THE REASON FOR USING LOW OR SETTING IT TO THE LOW LEVEL OF SIGNIFICANCE MEANS WE NEED  STRONGER EVIDENCE AGAINST NULL HYPOTHESIS BEFORE WE REJECT THE NULL HYPOTHESIS.

SO IF THE NULL HYPOTHESIS IS TRUE, WE WILL LESS LIKELY TO REJECT IT.

I HOPE I WAS HELPFUL AND HAVE CLEARED YOUR DOUBTS.

THANKYOU