The FDA, Food and Drug Administration, has the responsibility of deciding whethe

Question

The FDA, Food and Drug Administration, has the responsibility of deciding whether newly invented drugs should be allowed on the market. Thus the FDA can either reject a newly invented drug and not allow it on the market, if they feel the drug could be harmful to people, or they can accept the drug and allow it to be marketed. What are the two types of errors that the FDA could be making in their decision? Can you see that which error is Type 1 and which is Type II depends on what the FDA uses as their null (maintained) hypothesis?

Explanation / Answer

Type I and type II errors. ... In statistical hypothesis testing, a type I error is the incorrect rejection of a true null hypothesis (also known as a "false positive" finding), while a type II error is incorrectly retaining a false null hypothesis (also known as a "false negative" finding).

Suppose:

Null: New drug is not effective and should not be allowed

Alt: New drug is effective and should be allowed

Type 1 error:

We know that New drug is not effective and should not be allowed but still we allow the drug. This might cause side effects or serious problems in consumers.

Type 2 error:

We know that New drug is effective and should be allowed but still we dont allow the drug. This might cause company millions of dollars as the drug might have fetched them handsome money and could have saved lives too

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