One-Sample

Tests of Hypothesis
Chapter 10

1
Learning Objectives

LO10-1 Explain the process of testing a hypothesis

LO10-2 Apply the six-step procedure for testing a hypothesis
LO10-3 Distinguish between a one-tailed and a two-tailed test of hypothesis
LO10-4 Conduct a test of a hypothesis about a population mean
LO10-5 Compute and interpret a p-value
LO10-6 Use a t-statistic to test a hypothesis
LO10-7 Compute the probability of a Type II error
10-2
Hypothesis Testing

Hypothesis testing begins with a hypothesis statement about a population parameter

HYPOTHESIS A statement about a population parameter subject to verification

Examples
The mean speed of automobiles passing milepost 150 on the West Virginia Turnpike is 68 mph
The mean cost to remodel a kitchen is $20,000

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Hypothesis Testing

The objective of hypothesis testing is to verify the validity of a statement about a population parameter

HYPOTHESIS TESTING A procedure based on sample evidence and probability theory to determine
whether the hypothesis is a reasonable statement.

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Step 1 of the Six-Step Process

State the null hypothesis (H0) and the alternate hypothesis (H1)
NULL HYPOTHESIS A statement about the value of a population parameter developed for the
purpose of testing numerical evidence.
The null hypothesis always includes the equal sign
• For example; =, ≥, or ≤ will be used in H0

ALTERNATE HYPOTHESIS A statement that is accepted if the sample data provide sufficient
evidence that the null hypothesis is false.

The alternate hypothesis never includes the equal sign

• For example; ≠, <, or > is used in H1
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Step 2 of the Process

Next, you select the level of significance, α

LEVEL OF SIGNIFICANCE The probability of rejecting the null hypothesis when it is true.

Sometimes called the level of risk

Can be any value between 0 and 1
Traditionally,
• 0.05 is used for consumer research projects
• 0.01 for quality assurance
• 0.10 for political polling
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Possible Error in Hypothesis Testing

Since the researcher cannot study every item or individual in the population, error is possible
TYPE I ERROR Rejecting the null hypothesis, H0, when it is true.
Type I error is designated with the Greek letter alpha, α
TYPE II ERROR Not rejecting the null hypothesis when it is false.
Type II error is designated with the Greek letter beta, β

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Step 3 of the Process
Then, select the test statistic

TEST STATISTIC A value, determined from sample information, used to determine

whether to reject the null hypothesis.
In hypothesis testing for the mean, μ, when σ is known, the test statistic z is computed with the following
formula

We can determine whether the distance between xത and μ is statistically significant by finding the number of
standard deviations xത is from μ

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Step 4 of the Process

Formulate the decision rule:

• The decision rule is a statement of specific conditions under which the null hypothesis
is rejected and the conditions under which it is not rejected
• The region or area of rejection defines the location of all the values that are either so
large or so small that their probability of occurrence under a true null hypothesis is
remote
CRITICAL VALUE The dividing point between the region where the null hypothesis is rejected and
the region where it is not rejected.

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Critical Value

• The sampling distribution of the statistic z follows the normal distribution

• Here, an α of .05 is used in a one-tailed test
• The value 1.645 separates the regions where the null hypothesis is rejected and where it
is not rejected
• The value 1.645 is the critical value

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Steps 5 & 6 of the Six-Step Process

Step 5 Make a decision

• First, select a sample and compute the value of the test statistic
• Compare the value of the test statistic to the critical value
• Then, make the decision regarding the null hypothesis

Step 6 Interpret the results

• What can we say or report based on the results of the statistical test?

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One-Tailed and Two-Tailed Tests

H0: ≥ 60,000 miles H0: = $65,000 per year H0: ≤ 453 grams
H1: < 60,000 miles H1: ≠ $65,000 per year H1: > 453 grams
with an α = 0.05 with an α = 0.05 with an α = 0.05
Left-tailed test Two-tailed test Right-tailed test

Note that the total area in the normal distribution is 1.0000.

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Two-Tailed Test Example, σ Known
Jamestown Steel Company manufactures and assembles desks and other office equipment at several plants in New
York State. At the Fredonia plant, the weekly production of the Model A325 desk follows a normal distribution with a
mean of 200 and a standard deviation of 16. New production methods have been introduced and the vice president of
manufacturing would like to investigate whether there has been a change in weekly production of the Model A325. Is
the mean number of desks produced different from 200 at the .01 significance level?

Step 1: State the null hypothesis and alternate hypothesis.

H0: μ = 200 desks
H1: μ ≠ 200 desks

Step 2: Select the level of significance. Here α = .01

Step 3: Select the test statistic. In this example, we’ll use z

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Two-Tailed Test Example, σ Known

Step 4: Formulate the decision rule by first determining the critical values of z.

Decision Rule: If the computed value of z is not between -2.575 and 2.576, reject the null hypothesis. If z falls
between -2.576 and 2.576, do not reject the null hypothesis.
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Two-Tailed Test Example, σ Known

Step 5: Take sample, compute the test statistic, make decision.

The mean number of desks produced last year (50 weeks because the plant was shut down 2 weeks for vacation) is
203.5. The standard deviation of the population is 16 desks per week. Compute z with formula 10-1.
xത − μ 203.5−200
z= = = 1.547
σ/ n
16/ 50

Decision: Because 1.547 does not fall in the rejection region, we decide not to reject H0.

Step 6: Interpret the result.

We did not reject the null hypothesis, so we have failed to show that the population mean has changed from 200
per week.
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One-Tailed Test

Suppose instead of wanting to know if there Before: Now:

had been a change in the mean number of A two-tailed test A one-tailed test
desks assembled, the vice president wanted H0: = 200 desks H0: ≤ 200 desks
to know if there had been an increase in the H1: ≠ 200 desks H1: > 200 desks
number of units assembled. 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? Use α = .01.

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The p-Value in Hypothesis Testing

p-VALUE The probability of observing a sample value as extreme as, or more extreme than the value
observed, given that the null hypothesis is true.
Compare the p-value with the level of significance, α
• If the p-value is smaller than the significance level, reject H0
• If the p-value is larger than α, H0 is not rejected
A p-value not only results in a decision about H0, but gives additional insight about the strength of that decision

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Finding a p-Value

In the previous example about desk production, the computed z was 1.547 and H0 was not rejected
Round the computed z-value to two decimal places, 1.55
Using the z-table, find the probability of finding a z-value of 1.55 or more by .5000 - .4394 = .0606
Since this is a two-tailed test 2(.0606) = .1212
In this chart, we can easily compare the p-value with the level of significance

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Hypothesis Testing, σ Unknown

When testing a hypothesis about a population mean

The major characteristics of the t distribution are

• It is a continuous distribution
• It is bell-shaped and symmetrical
• There is a family of t distributions, depending on the number of degrees of freedom
• It is flatter, or more spread out, than the standard normal distribution

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Hypothesis Testing, σ Unknown Example
The McFarland Insurance Company Claims Department reports the mean cost to process a claim is $60. An industry
comparison showed this amount to be larger than most other insurance companies, so the company instituted cost-
cutting measures. To evaluate the cost-cutting measures, a random sample was taken of 26 claims processed last
month and the cost to process each claim was recorded (see below).

At the .01 significance level, is it reasonable to conclude the mean cost to process a claim is now less than $60?

Step 1: State the null hypothesis and the alternate hypothesis H0: μ ≥ $60
H1: μ < $60
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Hypothesis Testing, σ Unknown Example

Step 2: Select the level of significance; we will use .01

Step 3: Select the test statistic; we will use t
Step 4: Formulate the decision rule; reject H0 if t is less than -2.485
Step 5: Take sample, make decision; Do not reject H0
Step 6: Interpret the result; The test results do not allow the claims
manager to conclude the cost-cutting measures have been
effective.

xത − μ $56.423−$60
t= = = -1.82
s/ n
$10.41/ 26

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Type I and Type II Errors

Type I error occurs when a true null hypothesis is rejected

• The probability of making a Type I error is equal to the level of significance, α
A Type II error occurs when a false null hypothesis is not rejected
• The probability of making a Type II error is designated, β
• The likelihood of a Type II error must be calculated comparing the hypothesized distribution to an
alternate distribution based on sample results and can be calculated with this formula

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Type II Error Example
Western Wire Products purchases steel bars to make cotter pins. Past experience indicates that the mean tensile
strength of all incoming shipments is 10,000 psi and that the standard deviation is 400 psi. To monitor the quality of
the cotter pins, samples of 100 pins are randomly selected and tested for their strength. Using a 0.05 significance
level, accept the shipment if the sample mean strength falls between the critical values 9.922 psi and 10.078 psi. If
the sample mean does not fall between the critical values, we conclude the shipment does not meet the quality
standard.

The sample mean, 9.900 psi, is not within the specified

range. To calculate the probability of a Type II error, assume
the sample mean is the true mean (see graph B). Determine
the probability of the sample mean falling between 9.900
and 9.922. Then subtract this probability from .5000 to
arrive at the probability of making a Type II error, .2912

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