After test-marketing a new product, a restaurant chain concluded that introducti

Question

After test-marketing a new product, a restaurant chain concluded that introduction of the product nationwide would increase its sales by more than 11%. This conclusion was based on recording sales information for a random sample of its restaurants selected for the marketing trial. With denoting the mean percentage increase in sales for all its restaurants, consider using the sample data to decide between H0 : = 11 and Ha : > 11.

After test-marketing a new product, a restaurant chain concluded that introduction of the product nationwide would increase its sales by more than 11%. This conclusion was based on recording sales information for a random sample of its restaurants selected for the marketing trial with denoting the mean percentage increase in sales for all its restaurants, consider using the sample data to decide between Ho : = 11 and Ha· > (a) Is the restaurant chain's conclusion consistent with a decision to reject Ho or to fail to reject Ho? Reject Ho Fail to reject Ho (b) If the restaurant is incorrect in its conclusion, is the company making a Type I or a Type II error? Type 1 error Type II error

Explanation / Answer

(a) Reject H0 as the decesion is in favor of the alternate hypothesis i.e. introduction of new product will increase its sales by more than 11%

(b) Type 1 error i.e. rejecting a true hypothesis

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