9) Three years ago, the mean price of a single-family home was $243,706. A real
ID: 3431080 • Letter: 9
Question
9) Three years ago, the mean price of a single-family home was $243,706. A real estate broker believes that the mean price has decreased since then.
(a) Which of the following is the hypothesis test to be conducted?
A) H0: u = $243,706; H1: u < $243,706
B) H0: u = $243,706; H1: u does not equal $243,706
C) H0: u = $243,706; H1: u > $243,706
(b) Which of the following is a type I error?
A) The broker rejects the hypothesis that the mean price is $243,706, when it is the true mean cost.
B) The broker fails to reject the hypothesis that the mean price is $243,706, when the true mean price is less than $243,706.
C) The broker rejects the hypothesis that the mean price is $243,706, when the true mean price is less than $243,706.
(c) Which of the following is a type II error?
A) The broker fails to reject the hypothesis that the mean price is $243,706, when it is the true mean cost.
B) The broker rejects the hypothesis that the mean price is $243,706, when it is the true mean cost.
C) The broker fails to reject the hypothesis that the mean price is $243,706, when the true mean price is less than $243,706
Explanation / Answer
(a)A
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(b) A
Type I error: We reject Ho when it is true.
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(c)B
Type II error: We do not reject Ho when it is false.
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