WORKSHOP

Dec – 2020 ATTEMPT (BUSINESS STATISTICS)

Hypothesis testing:

The following four steps outline the process of hypothesis testing and introduce some of the new
terminology.

Step 1:
State the hypotheses and select an level. The null hypothesis, Ho, always states that the treatment has
no effect (no change, no difference). The alpha level determines the risk of a Type I error.

Step 2:
Locate the critical region. The critical region consists of outcomes that are very unlikely to occur if the
null hypothesis is true. That is, the critical region is defined by sample means that almost impossible to
obtain just by chance.

Step 3:
Compute the test statistic. The test statistic forms a ratio comparing the obtained difference between the
sample mean and the hypothesized population mean versus the amount of difference we would expect
just by chance (standard error).

Step 4:
A large value for the test statistic shows that the obtained mean difference is more than chance. If it is
large enough to be in the critical region, we conclude that the difference is significant or that the
treatment has a significant effect. In this case we reject the null hypothesis.

If the mean difference is relatively small, then the test statistic will have a low value. In this case, we
conclude that the evidence from the sample is not sufficient, and the decision is fail to reject the null
hypothesis.

Errors in hypothesis testing:

Ho HA
Reject Ho Type – I error ( ) Correct decision (1 – )
Power of test
Do not reject Ho Correct decision (1 – ) Type – II error ( )

Deciding upon an Appropriate test:

While deciding an appropriate test the following hints are helpful:

(i) If we are looking for a definite decrease. i.e. if HA is given by < o we use a one – sided left tail
test.
(ii) If we are looking for a definite increase. i.e. if HA is given by > o we use a one – sided right tail
test.
(iii) If we are looking for any change. i.e. if HA is given by o

Note: The choice of a one – sided left tail, one – sided right tail test or a two – sided test depends
upon the type of alternative hypothesis.

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WORKSHOP
Dec – 2020 ATTEMPT (BUSINESS STATISTICS)

1. The manufacturer of patent medicine claimed that it was at least 90% effective in relieving an allergy for
a period of 8 hours. In a sample of 200 people, who had the allergy, the medicine provided relief for 160
people. Determine whether the manufacturer’s claim is legitimate?
a. Claim is rejected,
b. Claim is not rejected

1. When the null hypothesis has been true, but the sample information has resulted in the rejection of
the null hypothesis, a ______________ has been made.

a. Level of significance b. Type II error c. Critical value d. Type I error

2. The maximum probability of a type I error that the decision maker will tolerate is called the__

a. Level of significance b. Decision rule c. Critical value d. Probability value

3. A hypothesis test in which rejection of the null hypothesis occurs for values of the point estimator in
either tail of the sampling distribution is called.

a. Null hypothesis b. The alternative hypothesis c. A one tailed test d. A two tailed test

4. The rejection and non - rejection regions are divided by the

a. Rejection value b. Dividing point c. Critical value d. Point of no return

5. When a true null hypothesis is rejected, the researcher has committed a ___
a. Type II error b. Type I error c. Rejection error d. Error in judgment

6. Suppose the alternative hypothesis in a hypothesis test is “the population mean is greater than 65”.
If the sample size is 50 and the alpha is 0.05, the critical value of z is:

a. 1.65 b. - 1.65 c. 1.96 d. 2.33

7. Suppose you are testing the null hypothesis that a population mean is greater than or equal to 65,
against the alternative hypothesis that the population mean is less than 65. The sample size is 81 and
the alpha is 0.01. if the sample mean is 62 and the sample standard deviation is 19, the observed z
value is

a. 1.00 b. - 1.00 c. - 1.42 d. 2.16

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WORKSHOP
Dec – 2020 ATTEMPT (BUSINESS STATISTICS)

8. A two tailed hypothesis test about the mean is performed. The observed z value is 1.78. if alpha is
0.05, the correct decision would be:
I. Fail to reject the null hypothesis.
II. Reject the null hypothesis.
III. Take larger sample.
IV. Not enough information to make a decision.

a. I b. II c. III d. IV

9. Given level of significance 0.01, which of the following statement is correct?

a. If null hypothesis is rejected there is 99% chance that the result is wrong.
b. If the null hypothesis is accepted more that 99% chance that result is wrong.
c. There is 1% chance that Ho is rejected.
d. If the null hypothesis is rejected there is 1 % chance that the result is wrong.

10. A researcher is conducting a one tailed test with = 0.01 to determine whether a treatment
produces a significant increase in scores. What Z – score values (s) would define the critical region
for this test?
a. Beyond + 2.33
b. Beyond – 2.33
c. Beyond + 2.58
d. Beyond – 2.58

11. A significance level of 0.01 means that?

a. 1% level of incorrectly rejecting of null hypothesis.
b. 1% probability of incorrectly acceptance of null hypothesis.
c. 99% confidence that null hypothesis is false.
d. None of these

12. “The machine is working properly with the same average output level as given in last year”
The above statement represents
a. Statistical hypothesis
b. Null hypothesis
c. Alternate hypothesis
d. B or C

13. A medicine company claims that average alcohol content in their medicine is at most 0.767 ml. in
order to test the claim, a sample of 45 units is selected having average alcohol content of 0.78 ml
with a standard deviation of 0.02 ml. using 5% level of significance answer the following questions.

I. Calculated value of test statistic

II. Critical value

III. One tail of two tail test

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IV. Weather Ho is accepted or rejected.

14. If you want to test the claim that an automobile is driven on the average more than 20,000 km per
year. The null and alternative hypothesis will be

a. Ho: µ = 20,000, b. Ho: µ > 20,000,

HA: µ ≠ 20,000 HA: µ ≠ 20,000

c. Ho: µ ≤ 20,000, d. Ho: µ = 20,000,

HA: µ > 20,000 HA: µ < 20,000

15. Use of Z – test or t – test depends upon

a. Sample size
b. Population known or unknown
c. Both a and b
d. None of these

16. A sample of n = 15 scores produces a t statistic of t = - 2.96. If a researcher is using a regular two
tailed test with = 0.01, what decision should be made?
a. Reject the null hypothesis.
b. Fail to reject null hypothesis.
c. Cannot determine without more information.
d. None of the above.

17. t distribution is use when

a. sample size is less than 30
b. sample size is greater than 30
c. sample size is less than 30 and σ is unknown
d. sample size is less than 30 and σ is known

18. Ten cartons are taken at random from an automatic filling machine. The mean net weight of the 10
cartons is 15.90 oz and the sum of squared deviations from this mean is 0.27 (oz)2. Does the sample
mean differ significantly from the intended weight of 16 0z?

Null and alternative Hypothesis:

Level of significance:

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WORKSHOP
Dec – 2020 ATTEMPT (BUSINESS STATISTICS)

Test statistic:

Decision:

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