I am deciding on whether to invest 400,000 CAD to open a convenience store in pa

Question

I am deciding on whether to invest 400,000 CAD to open a convenience store in particular spot in Ottawa. I know that the business will be profitable, with income of 70,000 CAD per year, if the store will have in average = 60 or more customers per day. If I am convinced that the business will be profitable then I will go ahead and open the store otherwise I won’t. Hence I am dealing with this hypothesis testing problem. H0 : = 60 vs Ha : < 60 (A) [1] Explain what Type I error means in the context of this problem. (B) [1] What is the consequence of Type I error. (C) [1] Explain what Type II error means in this context. (D) [1] What is the consequence of Type II error in the context of this problem. (E) [1] Which error is more expensive in your opinion. Explain.

Explanation / Answer

[1] Explain what Type I error means in the context of this problem. (B)

it is error to reject that in average = 60 customers per day being this true

[1] What is the consequence of Type I error.

the consequence will be that we are going to left the project being this one profitable

(C) [1] Explain what Type II error means in this context.

it is error to fail to reject that in average = 60 customers per day being this false

(D) [1] What is the consequence of Type II error in the context of this problem. (E)

the consequence will be that we are going to acept the project being this one no profitable

[1] Which error is more expensive in your opinion. Explain.

both are expensive in the error type I you lose all the income and the profits of the invest, and with the error type II you loose all the invest because it wont be profittable.

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