A fast-food franchise is considering building a restaurant at a busy intersectio

Question

A fast-food franchise is considering building a restaurant at a busy intersection. A financial advisor determines that the site is acceptable only if, on average, more than 300 automobiles pass the location per hour. The advisor tests the following hypotheses:

Ho: 300.

HA: > 300.

The consequences of committing a Type II error would be that__________________________.

A.        the franchiser builds on an acceptable site

B.        the franchiser builds on an unacceptable site

C.        the franchiser does not build on an acceptable site

D.        the franchiser does not build on an unacceptable site

Explanation / Answer

We know, Type-II error is false negative i.e. P(Type-II error) = P(Fail to reject H0 | H0 is false).

Hence a Type-II error will occur when we conclude that average number of automobiles passed per hour is <= 300 when actually it is >300. So the franchiser doesn't build on an acceptable site.

So Option (C) is the correct choice. (Ans).

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