Martin Luther University Halle-Wittenberg Statistics II

Chair of Econometrics

Exercise Set 9
Winter Semester 2022/23

1. After years of production, a manufacturer of batteries for automobiles finds that on average,
their batteries last 42.3 months with a standard deviation of σ = 4. Now, a new manufacturing
process is being introduced. In a sample of ten batteries produced by the new method the
average life is found to be 43.4 months. Assume that the average life of batteries follow a
normal distribution.

a) Test whether the batteries produced by the new method have a longer life on average.
State the hypotheses, rejection rule, empirical value of the test statistic, and your deci-
sion (α = 0.05).

• hypotheses: H0 : µ ≤ 42.3 vs. H1 : µ > 42.3

• rejection rule: reject H0 if Z > zα = z0.05 = 1.645
• empirical value of test statistic: Z = x̄−µ √σ
0
= 43.4−42.3
√4
= 1.1
1.2649 = 0.8696
n 10
• decision: Because the test statistic is lower than the critical value,
we cannot reject the null hypothesis. We do not have sufficient
empirical evidence to claim that batteries produced by the new method
have a higher life on average.

b) Find the probability of committing a type one error.

The probability of a type one error depends on the prior probability that the
null hypothesis is true. If it is true, then the chance of a false rejection
is 5% (= α). If we know that the null hypothesis is false, there is no
chance of a type one error. If we do not know whether the null is true or
false, the probability of a type one error lies between zero and 5%.

Reality
Decision H0 true H0 false
Not rejecting H0 correct decision Type II error (probability
β)
Rejecting H0 Type I error (probability α) correct decision (power)

c) Suppose the actual average life of a battery under the new manufacturing method is
µ = 44. Determine the power of the test and the probability of committing a type II
error.

• The power of the test is 1 − β, where β is the probability of a type II

error.
• P(Type II error) = P(Do no reject H0 |H0 is false)

1
 • Critical value = 1.645,find the the x̄ value it corresponds to
x̄ − µ
Zα = √
σ/ n

x̄ − 42.3
= 1.645 = √
4/ 10

4
= x̄ = 42.3 + 1.645 · √ = 44.38
10
• Find the probability that x̄ < 44.38 given that µ1 = 44

P(x̄ ≤ 44.38|µ = 44)

44.38 − µ1
P(z ≤ √ )
σ/ n

44.38 − 44
P(z ≤ √ )
4/ 10

= p(z ≤ 0.30) = 0.617 ∼ 0.62

• Power of the test - Probability of rejecting the null hypothesis when it

is false

1 − β = 1 − 0.62 = 0.38

If battery life has a normal distribution and, unknown to us, the actual
average life of a battery under the new manufacturing method is µ = 44, then
the probability of rejecting the hypothesis that the mean is less than 42.3
is 0.38. That is, for this situation where we should reject and conclude
that the new manufacturing method is better on average, there is a 0.38
probability of making the correct decision that the null hypothesis is false.
Consequently, the probability of committing a Type II error and failing to
reject even though the null hypothesis is false is 1-0.38 = 0.62.

2. Within a school district, a sample of students is randomly assigned to one of two math
teachers, Mrs. A and Mr. B. After the assignment, Mrs. A had 15 students and Mr. B had
13. At the end of the year each class took the same standardized test. Mrs. A’s students had
an average test score of 78 (out of 100) with a variance of 100, and Mr. B’s students had an
test score of 85, with a variance of 225, on average.
Test the hypothesis that Mrs. A and Mr. B are equally effective teachers. Use a 0.10 level
of significance. Assume that the student performance is approximately normally distributed
and the variance are equal in both populations.

• definitions: let the sub-index 1 define Mrs. A and 2 Mr. B; let

x1i ∼ N(µ1 , σ21 ), x2 j ∼ N(µ2 , σ22 ), i = 1, ..., n1 , j = 1, ..., n2 , σ21 = σ22 = σ2
• hypotheses: H0 : µ1 = µ2 vs. H1 : µ1 ̸= µ2
• degrees of freedom: n1 + n2 − 2 = 15 + 13 − 2 = 26
• rejection rule: reject H0 if |T | > tn1 +n2 −2; α2 = t26;0.05 = 1.7056

2
 • empirical value of test statistic:
x̄1 − x̄2
T = r
(n1 −1)s21 +(n2 −1)s22

1
n1 + n12 n1 +n2 −2

78 − 85
=q
(15−1)·100+(13−1)2̇25
1 1
15 + 13 15+13−2

7
= −q
1 1

14·100+12·225
15 + 13 15+13−2

7
=−
4.7585

= −1.4711

• decision: Because the test statistic in absolute value is not greater than
the critical value, we cannot reject the null hypothesis of equal test scores
for both work teachers.

3. An economics professor prepared two versions of microeconomics exams (exam 1 and 2).
Summary results for the scored points (x) are shown below:

ni x̄i s2i
exam 1 36 72 6.00
exam 2 32 76 8.00

Assume that the students randomly take one of the exams. From previous exams the pro-
fessor knows that the scored points in both exams follow normal distributions with different
variances. Test whether the first exam is more difficult than the second exam, i. e. students
score systematically less points in the first exam (α = 0.10).

• definitions: Let the sub-index 1 define the first exam and 2 the second
exam; let x1i ∼ N(µ1 , σ21 ), x2 j ∼ N(µ2 , σ22 ), i = 1, ..., n1 , j = 1, ..., n2 , σ21 =
̸ σ22
• hypotheses: H0 : µ1 ≥ µ2 vs. H1 : µ1 < µ2
• degrees of freedom:
 
  2 2 2 
s1 s2  
  
8 2   1 1
2 

n1 + n2
  6
 + +
df = ν =   2 2  2 2  =  6 362 32 8 2  =  1 62 4 1 2 
     
 s1 s2  ( 36 ) ( 32 ) (6) (4)
n1 n2 35 + 31 35 + 31
n1 −1 + n2 −1

$ %    
0.1736 0.1736 0.1736
= 0.0278 0.0625
= = = ⌊61.7882⌋ = 61
35 + 31
0.0008 + 0.0020 0.0028

• rejection rule: reject H0 if T < −tν;α = −t61;0.10 = −1.2956

3
• empirical value of test statistic:
x̄1 − x̄2 72 − 76 4
T=r =q =− = −6.197
2
s1 2
s2 6
+ 8 0.4343
n1+ n2
36 32

• decision: Because the test statistic is lower than the critical value, we
can reject the null hypothesis that students score more points in the first
exam.