STAT 2000 Lecture Notes - Type I And Type Ii Errors
19 Sep 2014
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An art collector is trying to decide whether to pay. ,000 to buy insurance for a ,000 painting. H0: the painting will not be stolen vs. ha: the painting will be stolen. Explain what it would mean in this case to make a. Type i error and a type ii error. Explain the potential consequences of each wrong decision. Answer: we make a type i error when we reject h0 when h0 is true. In this case, we would make a type i error if we concluded the painting will be stolen when he was in fact it won"t be. The potential consequence of this incorrect decision is that we are buying insurance for something that will not happen. We make a type ii error when we fail to reject h0 when. In this case, we would make a type ii error if we failed to conclude the painting will be stolen when in fact it will be.
