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

Type II error occurs when the null hypothesis is not rejected when it is false. In this case, the hypothesis test incorrectly concluded that the average loss did not exceed $34,000, when in fact it was higher.

Robin Inc Feared That the Average Company Loss Is Running Beyond