Robin Inc. feared that the average company loss is running beyond $34,000. It initially conducted a hypothesis test on a sample extracted from its database. The hypothesis was formulated as H0: average company loss $34,000 vs. H1: average company loss $34,000. The test resulted in favor of Robin Inc.'s loss not exceeding $34,000. Detailed study of company accounts later revealed that the average company loss had run up to $37,896. Which of the following errors were made during the hypothesis test?
A) Type III error
B) Type II error
C) Type I error
D) Type IV error

Question

Robin Inc. feared that the average company loss is running beyond $34,000. It initially conducted a hypothesis test on a sample extracted from its database. The hypothesis was formulated as H0: average company loss $34,000 vs. H1: average company loss > $34,000. The test resulted in favor of Robin Inc.'s loss not exceeding $34,000. Detailed study of company accounts later revealed that the average company loss had run up to $37,896. Which of the following errors were made during the hypothesis test?
A) Type III error
B) Type II error
C) Type I error
D) Type IV error

Quizplus · Accepted Answer

A Type II error occurs when the null hypothesis is not rejected when it is actually false. In this case, the null hypothesis was that the average company loss was $34,000, but it was not rejected even though the true average loss was $37,896.

Robin Inc Feared That the Average Company Loss Is Running Beyond