Duke Energy reported that the cost of electricity for an efficient home in a particular neighborh...
Duke Energy reported that the cost of electricity for an efficient home in a particular neighborhood of Cincinnati, Ohio, was $104 per month (Home Energy Report, Duke Energy, March 2012). A researcher believes that the cost of electricity for a comparable neighborhood in Chicago, Illinois, is higher. A sample of homes in this Chicago neighborhood will be taken and the sample mean monthly cost of electricity will be used to test the following null and alternative hypotheses. Duke Energy has decided that if the cost of electricity in Chicago, Illinois is indeed higher than the cost of electricity in Cincinnati, Ohio, then it is worth their money to build a new facility in the vicinity of the Chicago, Illinois homes. What are the consequences of making a Type I error in this situation?
a)They have correctly identified that the cost of homes in Chicago is equal to or less than the cost of homes in Cincinnati, and they will not be spending money on a new facility.
b)They may be wasting money on a new facility because the cost of electricity is not actually higher in Chicago than it is in Cincinnati
c)They have incorrectly identified that the cost of homes in Chicago is equal to or less than the cost of homes in Cincinnati, and they will be missing out on an opportunity to correct the problem by building a new facility.
d)They have correctly identified that the cost of electricity in Chicago is higher, and they have made a decision of building the facility that is aimed at improving the problem.
Homework Answers
b)They may be wasting money on a new facility because the cost of electricity is not actually higher in Chicago than it is in Cincinnati
Null hypothesis=the cost of electricity for an efficient home is $104 per month
Alternative hypothesis=the cost of electricity for a comparable neighborhood in Chicago, Illinois, is higher than $104 per month
A Type 1 error assumes that the null hypothesis is false without testing it can be possible that the null hypothesis is true and result in a type 1 error.
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Duke Energy reported that the cost of electricity for an efficient home in a particular neighborh...
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