For a kong time, therales for a prodet he lren S3,.00. A com pany invests a larg

Question

For a kong time, therales for a prodet he lren S3,.00. A com pany invests a large number of money into new advertising for the product and then conducts a hypothesis test, using 0.05 level of significance, to see if monthly sales have increased for the product. The hypotheses are: Ho : -30.000 and HA : > 30,000. The conclusion of the test is that monthly sales have increased (a) What is the probability of type I error for this test? (b) Suppose that in reality, mouthly sales did not increase and the advertisement had no effect. What type of error occurred?

Explanation / Answer

a) Probability of Type 1 error is same as significance level which is 0.05

b)Type 1 Error will occured because in that case we reject the null hypothesis when it is actually true.

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