METHODS OF DATA ANALYSIS
DECISION MAKING WITH HYPOTHESIS TESTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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The level of significance is the maximum probability of committing a type II error.
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True
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False
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Either A or B
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None of the above
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Explanation:
Detailed explanation-1: -It selects a significance level of 0.05, which indicates it is willing to accept a 5% chance it may reject the null hypothesis when it is true or a 5% chance of committing a type I error. Assume the beta is calculated to be 0.025, or 2.5%. Therefore, the probability of committing a type II error is 97.5%.
Detailed explanation-2: -Level of significance is the “highest value” of the probability value for which the “null hypothesis” is rejected. “Type I error” is the probability of rejecting the null hypothesis when it’s true. Hence, level of significance is the “maximum allowable probability” of Type I error.
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