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Statistics for Decision- Making in Business - Maricopa Community ...

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6. This is the probability that we reject the null hypothesis when it is, <strong>in</strong> fact, true. That is<br />

( ) . This allows us to be 95% confident that we fail to reject<br />

when it is true, a correct decision.<br />

7.<br />

1) Hypotheses:<br />

8.<br />

2) <strong>Decision</strong> Rule: We will reject the null hypothesis when the likelihood of<br />

observ<strong>in</strong>g someth<strong>in</strong>g as small or smaller than 52 out of 1000 bushels is no<br />

larger than a 1% probability, under the assumption of the null hypothesis. That is,<br />

( )<br />

3) We will reject if the observed value of is smaller than some cutoff<br />

value of .<br />

4) Based on the sample evidence, we will either:<br />

a. Reject <strong>in</strong> favor of of <strong>in</strong>sect-related crop destruction <strong>for</strong> the<br />

farmer‟s new method.<br />

b. Fail to reject . We do not have sufficient evidence to conclude that the<br />

farmer‟s new method is better than his old method.<br />

1) Hypotheses:<br />

2) <strong>Decision</strong> Rule: We will reject the null hypothesis when the likelihood of<br />

observ<strong>in</strong>g someth<strong>in</strong>g as large or larger than ̅ is no larger than a 5%<br />

probability, under the assumption of the null hypothesis. That is,<br />

( ̅ )<br />

̅ 3) We will reject if the observed average of is larger than some cutoff<br />

value of ̅.<br />

4) Based on the sample evidence, we will either:<br />

a. Reject <strong>in</strong> favor of out of 5 questions are answered correctly by<br />

his students (as of recent observations).<br />

b. Fail to reject . We do not have sufficient evidence to conclude that the<br />

<strong>in</strong>structor‟s more recent students do better on the AP exam than his <strong>for</strong>mer<br />

students.<br />

9.<br />

1) Hypotheses:<br />

<strong>Statistics</strong> <strong>for</strong> <strong>Decision</strong>-<strong>Mak<strong>in</strong>g</strong> <strong>in</strong> Bus<strong>in</strong>ess © Milos Podmanik Page 245

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