One-Sample Tests

of Hypothesis

Chapter 10

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Learning Objectives
 LO10-1 Define a hypothesis.
 LO10-2 Explain the process of testing a hypothesis.
 LO10-3 Apply the six-step procedure for testing a hypothesis.
 LO10-4 Distinguish between a one-tailed and a two-tailed test of
hypothesis.
 LO10-5 Conduct a test of a hypothesis about a population mean.
 LO10-6 Compute and interpret a p-value.
 LO10-7 Use a t statistic to test a hypothesis.
 LO10-8 Compute the probability of a Type II error.

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 LO10-1 Define a hypothesis.

Hypothesis

Examples:
 Pay is related to performance: People who are paid
more perform better.
 Consumers prefer Coke over all other cola drinks.
 Billboard advertising is more effective than advertising
in paper-based media.
 Consumer confidence in the economy is increasing.

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 LO10-2 Explain the process
of testing a hypothesis.

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

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 LO10-2

Step 1: State the Null and the

Alternate Hypothesis
NULL HYPOTHESIS A statement about the value of a
population parameter developed for the purpose of
testing numerical evidence. It is represented by H0.

ALTERNATE HYPOTHESIS A statement that is

accepted if the sample data provide sufficient evidence
that the null hypothesis is false. It is represented by H1.

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 LO10-2

Step 2: State a Level of Significance:

Errors in Hypothesis Testing
The significance level of a test:
 Defined as the probability of rejecting the null
hypothesis when it is actually true.
 This is denoted by the Greek letter “”.
 Also known as Type I Error.
 We select this probability prior to collecting data and
testing the hypothesis.
 A typical value of “” is 0.05.

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 LO10-2

Step 2: State a Level of Significance:

Errors in Hypothesis Testing
Another possible error:
 The probability of not rejecting the null
hypothesis when it is actually false.
 This is denoted by the Greek letter “β”.
 Also known as Type II Error.
 We cannot select this probability. It is related
to the choice of , the sample size, and the
data collected.

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 LO10-2

Step 2: State a Level of Significance:

Errors in Hypothesis Testing

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 LO10-2

Step 3: Identify the Test Statistic

TEST STATISTIC A value, determined from sample
information, used to determine whether to fail to reject or
reject the null hypothesis.

To test hypotheses about population means we use

the z or t-statistic. For hypotheses about population
variances, we use the F-statistic.

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 LO10-2

Step 4: Formulate a Decision Rule:

One-Tail vs. Two-Tail Tests
CRITICAL VALUE Based on the selected level of significance, the
critical value is the dividing point between the region where the null
hypothesis is rejected and the region where it is not rejected.

If the test statistic is greater than or less than the critical value (in the region
of rejection), then reject the null hypothesis.

10
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 LO10-2

Step 5: Take a Sample, Arrive at

a Decision
 Identify an unbiased sample.
 Collect the data on the relevant variables.
 Calculate test statistics.
 Compare the test statistic to the critical value.
 Make a decision, i.e., reject or fail to reject the null
hypothesis.

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 LO10-2

Step 6: Interpret the Result

 What does the decision to reject or fail to reject
the null hypothesis mean in the context of the
study?
 Examples:
 “Based on the data, there is no evidence to
support the hypothesis that pay is related to
performance.”
 “Based on the data, there is evidence that
billboard advertising if more effective than
paper-based media advertising”.

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 LO10-5 Conduct a test of a
hypothesis about a population mean.

Hypothesis Test of a Population Mean, Known

Population Standard Deviation – Example
Jamestown Steel Company manufactures
and assembles desks and other office
equipment. 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, new
production methods have been introduced
and new employees hired. The VP 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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 LO10-5
LO10-3

How to Set Up a Hypothesis Test

 In actual practice, the status quo
Inequality
is set up as H0. Keywords
Symbol
Part of:
 If the claim is “boastful” the claim
is set up as H1 (we apply the Larger (or more) than > H1
Missouri rule – “show me”). Smaller (or less) than < H1
Remember, H1 has the burden
of proof. No more than  H0

 In problem solving, look for key At least ≥ H0

words and convert them into Has increased > H1
symbols. Some key words
Is there difference? ≠ H1
include: “improved, better than,
as effective as, different from, Has not changed = H0
has changed, etc.” Has “improved”, “is better See H1
than”, “is more effective” keywords

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 LO10-5
LO10-3

Hypothesis Setups for Testing a

Mean ()

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 LO10-5
Important Things to Remember about H0
and H1
 H0 is the null hypothesis; H1 is the alternate hypothesis.
 H0 and H1 are mutually exclusive and collectively
exhaustive.
 H0 is always presumed to be true.
 H1 has the burden of proof.
 A random sample (n) is used to “reject H0.”
 If we conclude “do not reject H0,” this does not
necessarily mean that the null hypothesis is true, it only
suggests that there is not sufficient evidence to reject H0;
rejecting the null hypothesis, suggests that the
alternative hypothesis may be true given the probability
of Type I error.
 Equality is always part of H0 (e.g. “=”, “≥”, “≤”).
 Inequality is always part of H1 (e.g. “≠”, “<”, “>”).
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 LO10-3

Hypothesis Test of a Population Mean,

Known Population Standard Deviation –
Example
Step 1: State the null and alternate hypotheses.
H0:  = 200
H1:  ≠ 200
(Note: The keyword in the problem “has changed.”)

Step 2: Select the level of significance.

α = 0.01 as stated in the problem.

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 LO10-3

Hypothesis Test of a Population Mean,

Known Population Standard Deviation –
Example
Step 3: Select the test statistic.
Use z-distribution since σ is known.

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 LO10-3

Hypothesis Test of a Population Mean,

Known Population Standard Deviation –
Example
Step 4: Formulate the decision rule.
Reject H0 if |z| >z/2
z > za /2
x-m
> za /2
s/ n
203.5 - 200
> z.01/2
16 / 50
1.55 is not > 2.58

Step 5: Make a decision and interpret the result.

H0 is not rejected because 1.55 does not fall in the rejection region.
Step 6: Interpret the result.
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 plant
has changed from 200 per week.
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 LO10-4 Distinguish between a one-tailed
LO10-5
LO6
and a two-tailed test of hypothesis.

Hypothesis Test of a Population Mean,

Known Population Standard Deviation –
One-tail 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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 LO10-4

One-Tailed Test versus Two-

Tailed Test

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 LO10-4

Testing for a Population Mean, Known

Population Standard Deviation – One-Tail
Example
Step 1: State the null hypothesis and the alternate
hypothesis.
H0:  ≤ 200
H1:  > 200
(Note: The 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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 LO10-4

Testing for a Population Mean, Known

Population Standard Deviation – One-Tail
Example
Step 4: Formulate the decision rule.
Reject H0 if z > z.

t > -ta ,n-1

x-m
za
s n
203.5 - 200
> z.01
16 50
1.55 is not > 2.326

Step 5: Make a decision. Because 1.55 does not fall in the rejection region,
H0 is not rejected.
Step 6. Interpret the result. Based on the evidence, we cannot conclude
that the average number of desks assembled increased in the last
50 weeks.
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 LO10-6 Compute and interpret a p-value.

p-Value in Hypothesis Testing

 A p-value is the probability of observing a sample value
as extreme as, or more extreme than, the value
observed (the test statistic), given that the null
hypothesis is true.

 In testing a hypothesis, we can also compare the p-

value to the significance level ().

 Decision rule using the p-value:

Reject H0 if p-value < significance level.

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 LO10-6

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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 LO10-6

What does it mean when the p-value < ?

 If p-value =.10, we have some evidence that H0 is not
true.

 If p-value =.05, we have strong evidence that H0 is not

true.

 If p-value =.01, we have very strong evidence that H0

is not true.

 If p-value =.001, we have extremely strong evidence

that H0 is not true.

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 LO10-7 Use a t statistic to test a
hypothesis.

Testing for the Population Mean:

Population Standard Deviation Unknown
 When the population standard deviation (σ) is unknown, the
sample standard deviation (s) is used in its place
 The t-distribution is used as the test statistic, which is computed
using the formula:

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 LO10-7

Testing for the Population Mean: Population

Standard Deviation 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 effect of the cost-cutting
measures, the Supervisor of the Claims Department selected
a random sample of 26 claims processed last month. The
sample information is reported below.
At the .01 significance level, is it reasonable to conclude that
a claim is now less than $60?

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 LO10-7

Testing for a Population Mean: Population

Standard Deviation Unknown – Example
Step 1: State the null hypothesis and the alternate hypothesis.

H0:  ≥ $60
H1:  < $60
(Note: The keyword in the problem is “now less than.”)

Step 2: Select the level of significance.

α = 0.01 as stated in the problem.

Step 3: Select the test statistic.

Since σ is unknown, use a t-distribution with n-1 (26 – 1 = 25)
degrees of freedom.

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 LO10-7

t-Distribution Table (Portion)

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 LO10-7

Testing for a Population Mean: Population

Standard Deviation Unknown – Example
Step 4: Formulate the decision rule.
Reject H0 if t < -t,n-1.

t < -ta ,n-1

x-m
< za
s n
203.5 - 200
< z.01
16 50
-1.818 is not < -2.485

Step 5: Make a decision. Because -1.818 does not fall in the rejection
region, H0 is not rejected at the .01 significance level.

Step 6: Interpret the result. We have not demonstrated that the cost-
cutting measures reduced the mean cost per claim to less than
$60. The difference of $3.58 ($56.42 - $60) between the sample
mean and the population mean could be due to sampling error.
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 LO10-7

Testing for a Population Mean: Population

Standard Deviation Unknown – Example
The current rate for producing 5 amp fuses at
Neary Electric Co. is 250 per hour. A new
machine has been purchased and installed that,
according to the supplier, will increase the
production rate. A sample of 10 randomly
selected hours from last month revealed the
mean hourly production on the new machine was
256 units, with a sample standard deviation of 6
per hour.

At the .05 significance level, can Neary conclude

that the new machine is faster?

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 LO10-7

Testing for a Population Mean: Population

Standard Deviation Unknown – Example
Step 1: State the null and the alternate hypothesis.

H0: µ ≤ 250
H1: µ > 250

Step 2: Select the level of significance.

It is .05.

Step 3: Select the test statistic.

The population standard deviation is not known. Use the t-distribution
with n - 1 (10 – 1 = 9) degrees of freedom.

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 LO10-7

Testing for a Population Mean: Population

Standard Deviation Unknown - Example
Step 4: State the decision rule.

There are 10 – 1 = 9 degrees of freedom. The null hypothesis is

rejected if t > 1.833.

x - m 256 - 250
t= = = 3.162
s n 6 10
Step 5: Make a decision. The null hypothesis is rejected.

Step 6: Interpret the results. The mean number produced is

more than 250 per hour.

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 LO10-8 Compute the probability
of a Type II error.

Type II Error
 Recall that Type I Error, or the level of significance, is
defined as the probability of rejecting the null hypothesis
when it is actually true. It is denoted by the Greek letter
alpha, “”.

 Type II Error is defined as the probability of “accepting”

the null hypothesis when it is actually false. It is denoted
by the Greek letter beta, “β”.

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 LO10-8

Type II Error – Example

A manufacturer 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, σ, is 400 psi. In order to make a decision about
incoming shipments of steel bars, the manufacturer set up
this rule for the quality-control inspector to follow: “Take a
sample of 100 steel bars. At the .05 significance level if the
sample mean strength falls between 9,922 psi and 10,078
psi, accept the lot. Otherwise the lot is to be rejected.”

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 LO10-8

Type I and Type II Errors Illustrated

If we take a sample of 100 bars and the sample mean is 9,900 psi, this value is
our best estimate of the true population mean. And, based on the Region A graph,
we should reject the null hypothesis with a 0.05 probability of a Type I error.
However, there is always sampling error. For a distribution with a population
mean of 9,900, it is possible that a sample would have a sample mean greater
than 9,922. See Region B. So we could commit a Type II error: Fail to reject a
false null hypothesis. Region B and the computed z-statistic show that the
probability of a Type II error is 0.2912 when our estimate of the population mean is
9,900.
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