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11.1 Introduction

This chapter introduced hypothesis testing, the central topic of a statistics course. Almost every chapter following this one uses the concepts, terminology, and notation discussed here. As a result, your understanding of the material in this chapter is critical to your mastery of the subject. We cannot state this too strongly. If you do not have a strong grasp of this material, you will not be capable of applying statistical techniques with any degree of success. We recommend that you spend as much time as possible on this chapter. You will find it to be a worthwhile investment. At the completion of this chapter you are expected to know the following: 1. 2. 3. 4. 5. 6. 7. 8. Understand the fundamental concepts of hypothesis testing. How to test hypotheses about the population mean. How to set up the null and alternative hypotheses. How to interpret the results of a test of hypothesis. How to compute the p-value of a test when the sampling distribution is normal. How to interpret the p-value of a test. How to calculate the probability of a Type II error and interpret the results. That there are five problem objectives and three types of data addressed in the book and that for each combination there are one or more statistical techniques that can be employed. 9. Understand that the format of the statistical techniques introduced in subsequent chapters is identical to those presented in this chapter and that the real challenge of this subject lies in identifying the correct statistical technique to use.

11.2

In this section, we presented the basic concepts of hypothesis testing. You are expected to know that meaning of the new terms introduced in the section.

EXERCISES

11.1 Define the following terms: a) Type I error

b) Type II error

c) Rejection region

121

If the question asks if there is sufficient evidence to conclude that is greater than 100, then H 1 : > 100 and H0 : = 100 If the question asks if there is sufficient evidence to conclude that is less than 100, then H 1 : < 100 and H0 : = 100 It should be noted that even though in the formal hypothesis test the null hypothesis precedes the alternative hypothesis, we determine the alternative hypothesis first, and the null hypothesis automatically follows. The second element requires little more than arithmetic to determine the value of the test statistic, which is

z

/ n

The value of in the test statistic comes from the null hypothesis.

Rejection Region

Some care must be exercised in setting up the rejection region. Bear in mind that the probability that the test statistic falls into the rejection region is . That means that in a two-tail test the rejection region is z>

z

/ 2

or z < z

/ 2

In a one-tail test with H0 : = 100 H 1 : > 100 the rejection region is z > z Notice that we z (rather than H0 : = 100 H 1 : < 100

z

/ 2

) because the entire rejection region is located in only one tail of the

123

124

The third element is the interpretation. There are only two possible conclusions of a test. If the test statistic falls into the rejection region, we reject the null hypothesis and conclude that there is sufficient evidence to conclude that the alternative hypothesis is true. If the test statistic does not fall into the rejection region, we do not reject the null hypothesis and conclude that there is not sufficient evidence to conclude that the alternative hypothesis is true. Notice that in either case the conclusion is based on the alternative hypothesis. That is, there is either enough evidence (reject H0 ) or not enough evidence (do not reject H0 ) to support the alternative hypothesis.

Example 11.1

A statistical analyst who works for a large insurance company is in the process of examining several pension plans. Because the length of life of the pension plan holders is critical to the plans' integrity, the analyst needs to know if the mean age has changed. In the last census (1991), suppose the mean age of retirees is 67.5. To determine whether the mean age has increased, the analyst selects a random sample of 100 retirees and finds that x = 68.2. If we assume that the population standard deviation is = 3.1, can we conclude with = .05 that there is evidence to indicate the mean age of retirees has increased since 1991?

Solution

The question asks if there is sufficient evidence to conclude that (the mean age at present) is greater than the mean age in 1991 (67.5). As a result, the alternative hypothesis is H 1 : > 67.5 It follows that the null hypothesis is H0 : = 67.5 The test statistic is

z

/ n

We wish to reject the null hypothesis in favor of the alternative hypothesis only if the test statistic is too large. Since the probability of rejecting the null hypothesis when it is true is = .05, the rejection region is z > z =

z. 05

1 .645

125

/ n

68 . 2 3 .1 /

67 .5 100

2. 26

The p-value is simply the probability that z is greater than 2.26. That is, p-value = P(Z > 2.26) = .5 - .4881 = .0119 The test statistic falls into the rejection region (and the p-value is small). As a result, we reject the null hypothesis and conclude that there is sufficient evidence to indicate that > 67.5.

Question: Answer:

Why must the null hypothesis specify one single value for the parameter? Because we must substitute one single value of the parameter when calculating the test statistic. Thus, if we specify H0 : = 100 we substitute = 100 when computing the test statistic x z = / n If we had specified H0 : 100 what value of would we use to calculate the test statistic?

Question: Answer:

What does it mean to reject the null hypothesis? When we reject the null hypothesis, we do so because there is enough statistical evidence (based on the value of a) to indicate that the value of the parameter specified in the null hypothesis is not correct. We conclude that there is enough evidence to support the alternative hypothesis.

Example 11.2

It is important for airlines to know the approximate total weight of the baggage carried on each airplane. An airline researcher believes that the mean baggage weight for each adult is 60 pounds. To test his belief, he draws a random sample of 50 adult passengers and weighs their baggage. He finds the sample mean to be 57.1 pounds. If he knows that the population standard deviation is 10 pounds, can he conclude at the 5% significance level that his belief is incorrect?

Solution

126

The researcher wants to know if the statistical result ( x = 57.1) is sufficient for him to conclude that his belief that = 60 is untrue. As a result, the alternative hypothesis is H 1 : 60 and the null hypothesis is H0 :

127

Question: Answer:

Why do we change the rejection region for different alternative hypotheses? The rejection region must always have a probability of . Thus, if we perform a two-tail test, the rejection region is z > z / 2 or z < - z / 2 In this test the rejection region is divided in half. In a one-tail test, the entire rejection region is located in one tail of the sampling distribution. Consequently, we reject the null hypothesis if z > z (when H 1 : > 100) and z < z (when H 1 : < 100)

Question:

Why is it misleading to say that we accept the null hypothesis when the value of the test statistic does not fall into the rejection region? If we say that we accept the null hypothesis, it implies that there is enough statistical evidence to infer that the parameter is actually equal to the value specified in the null hypothesis. In Example 11.2, we would state that since x = 58.1, there is enough evidence to conclude that = 60. This is, of course, an absurd conclusion. Consequently, when we do not reject the null hypothesis, we conclude that there is not enough evidence to support the alternative hypothesis.

Answer:

Example 11.3

In testing the hypotheses

128

Solution

a) With

z x x

= 152,

/ n

152 16 /

150 64

1 .0

z x x

= 160, =

n

160 16 /

150 64

5 .0

z x x

= 145, =

n

145 16 /

150

64

= 2 . 5

EXERCISES

11.6 Find the rejection region for each of the following tests: a) H0 : = 55 H 1 : 55 = 10 n = 100 = .05

11.7

129

a) H0 : = 28 H 1 : > 28 =5 n = 75 = .05

x

= 32

x

= 218

11.8

The director of the M.B.A. program at a large university informs incoming students that they are expected to devote more than 25 hours per week to homework. She decides to examine the extent to which students listen to her advice by taking a random sample of 15 students and calculating the mean number of hours per week of homework. Set up the null and alternative hypotheses and the rejection region if the director wants to know whether there is enough statis tical evidence to indicate that the students have accepted her advice. (Assume that 2 is known.) Use = .05. H0 : H1: Rejection region:

11.9

Repeat Exercise 11.8, supposing that the director wants to know whether there is enough statis tical evidence to indicate that the students have not accepted her advice. H0 : H1: Rejection region:

11.10 s

130

Conclusion:

11.11 A pizza parlor boasts that it can deliver pizzas on the average in less than 33 minutes. A random sample of 25 delivery times yields a sample mean of 31.2 minutes. If we assume that the population standard deviation is = 4 minutes, can we conclude at the 10% significance level that the pizza parlor is correct? H0 : H1: Test statistic: Rejection region: Value of the test statistic:

Conclusion:

11.12 Suppose that you, as a statistician (amateur, at this point) decide that for a series of hypothesis tests the level of significance should be .05. For each of the tests described below, determine the tests' conclusions. a) H0 : = 25 H 1 : 25 131

p-value = .0499

b) H0 : = 70 H 1 : > 70 p-value = .0522 c) H0 : = 200 H 1 : < 200 p-value = .9860 11.13 In testing the hypotheses H0 : = 700 H 1 : > 700 with = 200 and n = 100, we found

x

= 700.

= 650.

11.16 Find the p-value of the test for each given value of the test statistic z for the hypotheses H0 : = 25 H 1 : > 25 a) z = 1.0

b) z = 2.0

c) z = 3.0 132

d) z = 4.0

11.4

This section presented the method by which we calculate the probability of a Type II error. For you, the statistics student, the calculation of provides insights into how the hypothesis test works and how the significance level is selected. It is particularly important for you to realize that, for a fixed value of n, and have an inverse relationship. That is, increasing decreases , and vice versa. For a fixed , increasing n decreases , so by increasing the sample size we can improve the test. Additionally, the calculation of allows the statistician to judge how well a test performs. For example, if for a specific value of the parameter the statistician determines that is too large, corrective action is called for. The statistician can either increase or increase n. Students often have some difficulty in calculating or you timportant to remember the process inthat volves two stages. Stage 1 expresses the rejection region in terms of the unstandardized test statistic. This requires some algebraic manipulation to solve an inequality. Stage 2 calculates the probability that the unstandardized test statistic falls into the acceptance region given that the parameter is equal to some specific value.

Example 11.4

In testing the hypotheses H0 : = 100 H 1 : > 100 where = 30, we choose n = 36 and = .05. Find when = 110.

Solution

The standardized test statistic is

z

/ n

and the rejection region is z > z = z.05 = 1.645 To determine the rejection region for

z x

/ n

> 1.645

133

or

x

100

36

30 /

> 1.645

or

x

> 108.225

Notice that in solving this inequality we use the value of = 100 from the null hypothesis. The reason for this is that is the probability of a Type I error, which assumes that the null hypothesis is true. This completes stage 1. In stage 2, we calculate the probability that x falls into the acceptance region. Hence, = P( x < 108.225 given = 110) Since x is normally distributed, we standardize x by subtracting its mean (which is now assumed to be = 110) and dividing by its standard deviation ( / n = 30 / 36 ). =

P

x < / n

108 .225 30 /

110

36

P( z

< . 36 ) =

. 3594

Example 11.5

Suppose that in Example 11.4 we decide that is too large. We decide to increase the sample size to 100. What is the new value of ?

Solution

Stage 1: or

x z

/ n

> 1.645

100

100

30 /

> 1.645

or

x

> 104.935

Stage 2:

104 . 935 30 / 100

110 =

P(z

< 1 .69 ) =

.0455

134

Thus, by increasing the sample size from 36 to 100, we decrease from .3594 to .0455 (with = 30, = .05, and the actual value of assumed to be 110).

EXERCISES

11.17 For the hypothesis test below set up the rejection region in terms of x. H0 : = 200 H 1 : < 200 = 20 n = 25 = .01

11.20 A supermarket manager boasts that the average customer waits no more than 10 minutes at the checkout counter. A dissatisfied customer decides to show that there is statistical evidence that the manager is wrong. She decides to perform a test with n = 100 customers and = .05. Calculate the probability of erroneously concluding that the customer is not correct when in actual fact the average waiting time is 11.5 minutes. (Assume that = 5.)

135

11.5

This section described the way in which the rest of the book is organized. It makes clear that a major emphasis of our approach is on identifying the correct statistical technique. When a new technique is presented we will always describe the factors that identify its use.

136

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