A manager at Robin Inc. believes that the average accounts receivable exceeds $3

Question

A manager at Robin Inc. believes that the average accounts receivable exceeds $34,000. It initially conducted a hypothesis test on a sample extracted from its database. The hypothesis was formulated as H0: average accounts receivable $34,000 vs. H1: average accounts receivable < $34,000. The test results supported the manager’s belief. A detailed study of all records in the database later revealed that the average accounts receivable was $33,896. Which of the following errors were made during the hypothesis test? A: Type I error B: Type II error C: Both Type I and Type II error D: Neither Type I nor Type II errors

Explanation / Answer

Ans:

Option B is correct(Type II error)

Explanation:

In above case,we fail to reject null hypothesis,when actually null hypothesis is false(as actually recievables i.e. 33896 are less than 34000),so we are making type II error.

Type I error:

When we reject null hypothesis,but null hypothesis is true,we make type I error.

Type II error:

When we fail to reject null hypothesis,but null hypothesis is false,we make type II error.

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