1. You are thinking about opening a restaurant and searching for a good location
ID: 2945933 • Letter: 1
Question
1. You are thinking about opening a restaurant and searching for a good location. From research you have done, you know that the mean income of those living near the restaurant must be over $85,000 to support the type of upscale restaurant you wish to open. You decided to take a simple random sample of 50 people living near one potential location. Based on the mean income of this sample, you will decide whether to open a restaurant there. 2. State appropriate null and alternative hypotheses. 3. Describe a Type 1 and a Type II error, and explain the consequences of each 4. If you had to choose one of the "standard significance levels for your significance test, would you choose a- 0.01,0.05, or 0.10. Justify your choice.Explanation / Answer
Solution:
2. H0: ? = $85,000; Ha: ? > $85,000. ? = the mean income of residents near the restaurant.
3. Type I error - Open the restaurant in a location where residents will not be able to support it.
Type II error - Do not open the restaurant in a location where residents would be able to support it.
4. I would choose a = 0.01 because it minimizes the chance of making a type I error.
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