Chapter 4: One Sample Tests of Hypothesis

Course : Business Statistics

Assistant Professor Tahmina Sultana
Dept. of Management, FBS

McGraw-Hill/Irwin ©The McGraw-Hill Companies, Inc. 2008

Definitions
 Hypothesis
 Hypothesis testing
 Steps in solving test of hypothesis
 Types of hypothesis (Null and alternative hypothesis)
 Types of error
 Level of significance
 One and two tailed test
 Left tailed and right tailed test
 Test statistic
 P-value
 95% confidence interval
 What is a Hypothesis?

A Hypothesis is a statement about the

value of a population parameter
developed for the purpose of testing.
Examples of hypotheses made about a
population parameter are:
– The mean monthly income for systems analysts is
$3,625.
– Twenty percent of all customers at Bovine’s Chop
House return for another meal within a month.

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 What is Hypothesis Testing?

Hypothesis testing is a procedure, based on sample

evidence and probability theory, used to determine
whether the hypothesis is a reasonable statement and
should not be rejected, or is unreasonable and should
be rejected.

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 Hypothesis Testing Steps

5
 Types of error

6
 Type of Errors in Hypothesis Testing

 Type I Error -
– Defined as the probability of rejecting the null hypothesis when it is
actually true.
– This is denoted by the Greek letter “”
– Also known as the significance level of a test

 Type II Error:
– Defined as the probability of “accepting” the null hypothesis when it
is actually false.
– This is denoted by the Greek letter “β”

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 One-tail vs. Two-tail Test

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One sample mean test
When SD is known (Two tailed)

1. The mean lifetime of a sample of 100 light

tubes produced by a company is found to be
1580 hours with population standard
deviation of 90 hours. Test the hypothesis
that the mean lifetime of the tube light
produced by the company is 1600 hours.
When SD is known (one tailed / Right tailed)

2. The mean lifetime of a sample of 100 light

tubes produced by a company is found to be
1580 hours with population standard
deviation of 90 hours. Test the hypothesis
that the mean lifetime of the tube light
produced by the company is more than 1600
hours.
When SD is known (one tailed / Left tailed)

3. The mean lifetime of a sample of 100 light

tubes produced by a company is found to be
1580 hours with population standard
deviation of 90 hours. Test the hypothesis
that the mean lifetime of the tube light
produced by the company is less than 1600
hours.
 Testing for a Population Mean with a
Known Population Standard Deviation- Example

Jamestown Steel Company manufactures and

assembles desks and other office equipment at
several plants in western New York State. The
weekly production of the Model A325 desk at the
Fredonia Plant follows the normal probability
distribution with a mean of 200 and a standard
deviation of 16. Recently, because of market
expansion, new production methods have been
introduced and new employees hired. The vice
president of manufacturing would like to
investigate whether there has been a change in
the weekly production of the Model A325 desk.

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 Testing for a Population Mean with a
Known Population Standard Deviation- Example

Step 1: State the null hypothesis and the alternate

hypothesis.
H0:  = 200
H1:  ≠ 200
(note: keyword in the problem “has changed”)

Step 2: Select the level of significance.

α = 0.01 as stated in the problem

Step 3: Select the test statistic.

Use Z-distribution since σ is known

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 Testing for a Population Mean with a
Known Population Standard Deviation- Example

Step 4: Formulate the decision rule.

Reject H0 if |Z| > Z/2
Z  Z / 2
X 
 Z / 2
/ n
203.5  200
 Z.01 / 2
16 / 50
1.55 is not  2.58

Step 5: Make a decision and interpret the result.

Because 1.55 does not fall in the rejection region, H0 is not rejected.
We conclude that the population mean is not different from 200. So we
would report to the vice president of manufacturing that the sample
evidence does not show that the production rate at the Fredonia Plant
has changed from 200 per week.
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 Testing for a Population Mean with a Known Population Standard
Deviation- Another Example

Suppose in the previous problem the vice president wants to

know whether there has been an increase in the number of
units assembled. To put it another way, can we conclude,
because of the improved production methods, that the mean
number of desks assembled in the last 50 weeks was more
than 200?
Recall: σ=16, n=200, α=.01

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 Testing for a Population Mean with a Known Population Standard
Deviation- Example

Step 1: State the null hypothesis and the alternate

hypothesis.
H0:  ≤ 200
H1:  > 200
(note: keyword in the problem “an increase”)

Step 2: Select the level of significance.

α = 0.01 as stated in the problem

Step 3: Select the test statistic.

Use Z-distribution since σ is known

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 Testing for a Population Mean with a Known Population Standard
Deviation- Example

Step 4: Formulate the decision rule.

Reject H0 if Z > Z

Step 5: Make a decision and interpret the result.

Because 1.55 does not fall in the rejection region, H0 is not rejected.
We conclude that the average number of desks assembled in the last
50 weeks is not more than 200

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 Critical values for normal distribution

Level of significance
Critical values
1% 2% 4% 5% 10%
One tailed test 2.326 2.054 1.751 1.645 1.282

Two tailed test 2.56 2.326 2.054 1.96 1.645

Exercise
Del Monte Foods diced peaches in 4.5
ounce plastic cups on an average. To
ensure minimum required amount, Del
Monte set the filling operation to
dispense 4.51 ounces of peaches in
each cup. Standard deviation is 0.04
ounce and sample have been taken of
64 size. Test at 4% level of significance
whether the machine is functioning
properly.
When SD is unknown (Two tailed)

A random sample of 10 boys had the following I. Q’s:

70, 120, 110, 101, 88, 83, 95, 98, 107, 100
Do these data support the assumption of a population mean I. Q.
of 100?
 p-Value in Hypothesis Testing

 p-VALUE is the probability of observing a sample value as extreme as,

or more extreme than, the value observed, given that the null
hypothesis is true.

 In testing a hypothesis, we can also compare the p-value to with the

significance level ().

 If the p-value < significance level, H0 is rejected, else H0 is not rejected.

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 p-Value in Hypothesis Testing - Example

Recall the last problem

where the hypothesis
and decision rules
were set up as:
H0:  ≤ 200
H1:  > 200
Reject H0 if Z > Z
where Z = 1.55 and Z =2.33

Reject H0 if p-value < 

0.0606 is not < 0.01

Conclude: Fail to reject H0

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 What does it mean when p-value < ?

(a) .10, we have some evidence that H0 is not true.

(b) .05, we have strong evidence that H0 is not true.

(c) .01, we have very strong evidence that H0 is not true.

(d) .001, we have extremely strong evidence that H0 is not

true.

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 Confidence Interval Estimates for the Mean – By Formula
Compute the C.I.
using the t - dist. (since  is unknown)
s
X  t / 2, n 1
n
s
 X  t.05 / 2, 20 1
n
9.01
 49.35  t.025 ,19
20
9.01
 49.35  2.093
20
 49.35  4.22
The endpoints of the confidence interval are $45.13 and $53.57
Conclude : It is reasonable that the population mean could be $50.
The value of $60 is not in the confidence interval. Hence, we
conclude that the population mean is unlikely t o be $60.

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 Exercise
1. A sample of 400 male students is found to have a mean height
67.47 inches. Can it be reasonably regarded as a sample from
a large population with mean height 67.39 inches and
standard deviation 1.30 inches? Test at 10% level of
significance.
2. Suppose that it is known from experience that the standard
deviation of the weight of 8 ounces packages of cookies made
by a certain bakery is 0.16 ounces. To check its production is
under control on a given day, the true average of the packages
is 8 ounces; they select a random sample of 40 packages and
find their mean weight is 8.122 ounces. Test whether the
production is under control or not at 5% level of significance.
 Population standard deviation is
unknown
1. Is the temperature required to damage a computer on the average less
than 110 degrees? Because of the time of testing, twenty computers
were tested to see what minimum temperature will damage the
computer. The damaging temperature averaged 109 degrees with a
standard deviation of 3 degrees. (Use   0.05)

2. The specimen of copper wires drawn from a large lot has the following
breaking strength (in Kg. weight):

578, 572, 570, 568, 572, 578, 570, 572, 596, 544
Test whether the mean breaking strength of the lot may be taking to be 578
Kg. weights by using 10% level of significance.
A recent national survey found that high school students watched an
average (mean) of 6.8 movies per month with a population standard
deviation of 1.8. The distribution of number of movies watched per month
follows the normal distribution. A random sample of 36 high school
students revealed that the mean number of movies watched last month
was 6.2.
i. At the .04 significance level, can we conclude that high school students
watch fewer movies than the average?
ii. What is your decision regarding the null hypothesis based on the p-
value at 5% and 10% level of significance?
iii. Calculate 90% and 95% confidence interval. Make decision about null
hypothesis.
The mean life of a battery used in a digital clock is 305 days. The
lives of the batteries follow the normal distribution. The battery was
recently modified to last longer. A sample of 20 of the modified
batteries had a mean life of 311 days with a standard deviation of
12 days. Did the modification increase the mean life of the battery?
(a) State the null hypothesis and the alternate hypothesis.
(b) Show the decision rule graphically. Use the .05 significance level.
(c) Compute the value of t. What is your decision regarding the null
hypothesis? Briefly summarize your results.
(d) Construct 95% confidence interval. Make decision upon it.
Book exercise 36:

The postanesthesia care area (recovery room) at St. Luke’s Hospital in

Maumee, Ohio, was recently enlarged. The hope was that the change would
increase the mean number of patients served per day to more than 25. A
random sample of 15 days revealed the following numbers of patients.

25 27 25 26 25 28 28 27 24 26 25 29 25 27 24
i. At the .01 significance level, can we conclude that the mean number of
patients per day is less than 25?
ii. Calculate 90% and 95% confidence interval.
 Self practice

Book: Basic Statistics for Business and Economics. By Lind

Chapter 10 - One-Sample Tests of Hypothesis
Examples: Jamestown steel, page-327, Myrtle Beach
International airport, page-337
Self review 10-1, 10-2, 10-3, 10-4
 Exercise: 1- 20, 25-51
 Page number 329-362 (PDF file page number)
STATA output for a typical t-test
SPSS output for a typical t- test
Thank you