Guidelines for setting the level of significance include:
A) If costs associated with type 1 error are high and a type 2 error is not costly set the level of significance very low.
B) If costs associated with type 1 error are high and a type 2 error is not costly set the level of significance very high.
C) If costs associated with type 1 error are not very high and a type 2 error is costly set the level of significance much higher.
D) A and C
E) B and C

Question

Quizplus · Accepted Answer

The guidelines for setting the level of significance suggest that if the costs associated with a Type 1 error are high, but a Type 2 error is not costly, then the level of significance should be set very low. Conversely, if the costs associated with a Type 1 error are not very high but a Type 2 error is costly, then the level of significance should be set much higher. Therefore, both choices A and C are correct, making choice D the best answer.

Guidelines for Setting the Level of Significance Include