Martin Luther University Halle-Wittenberg Statistics II

Chair of Econometrics

Exercise Set 8 - Solutions

Winter Semester 2023/24

1. Briefly describe the steps of hypothesis testing: stating the hypotheses, selecting the level of
significance, computing the test statistic and making a decision.

• The null hypothesis (H0 ), is a statement about a population parameter,

such as the population mean, that is assumed to be true. The alternative
hypothesis(H1 ), is what we want to prove, which is usually a claim that is
contesting the null hypothesis.
• Level of significance, or significance level, refers to a criterion of
judgment upon which a decision is made regarding the value stated in a null
hypothesis. (You never computer the signficance level (α). This level is
selected or set by the reseacher. ,
• The test statistic is a numerical summary of the data to quantify departures
from H0 .
• The decision is based (i) on the value of the test statistic or (ii) on the
probability of obtaining a value for the test statistic (or a more extreme
value), given that the null hypothesis is true.

2. An outbreak of Salmonella-related illness was attributed to ice cream produced at a certain

factory. Scientists measured the level of Salmonella (x, in MPN/g1 ) in 9 randomly selected
batches of ice cream. The levels were:

0.593 0.142 0.691 0.231 0.793 0.519 0.392 0.418 0.392

Is there evidence that the mean level of Salmonella in the ice cream is greater than 0.3
MPN/g? State the hypotheses, rejection rule, empirical value of the test statistic, and your
conclusion (α = 0.01). Assume that the level of Salmonella found in ice cream is normally
distributed

• Calculate mean and the standard deviation of the sample

1 0.593 + 0.142 + ... + 0.392
x̄ = xi = = 0.4634
n∑ 9
r r
1 (0.593 − 0.463)2 + (0.142 − 0.463)2 + ... + (0.392 − 0.463)2
s= (xi − x̄)2 = = 0.2091
n−1 ∑ 8

• Define the hypotheses: H0 :µ ≤ µ0 = 0.3; H1 :µ > µ0 = 0.3

1 The most probable number (MPN) method is a tool for estimating the concentration of microorganisms in a
sample.

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 • Select the test statistic:
x̄ − µ0
t= ∼ tn−1
√s
n

• Rejection rule: Reject (H0 ) if t > td. f =n−1;α = 2.8965

The null hypothesis (H0 ) is rejected in favour of the the alternative
hypothesis (H1 ) at the 1% significance level if the value of the the test
statistic is greater than the critical value. i.e t > td. f =n−1;α (In a right
tailed test -the test statistic falls in the rejection region if it is
greater than the critical value).
• Calculate the empirical value of the test statistic:
x̄ − µ0 0.4634 − 0.3000 0.1634
T= = = = 2.3446
√s 0.2091
√ 0.0739
n 9

• Decision: Because the test statistic is lower than the critical value, we
cannot reject the null hypothesis that the mean level of Salmonella in the
ice cream is lower than 0.3 MPN/g at the 1% significance level.

3. A pharmaceutical company conducts a clinical trial involving 100 subjects complaining of

stomach pain. 50 subjects were assigned at random to receive a new drug, with the remain-
ing 50 subjects receiving a placebo. 30 of the 50 treated individuals felt better afterwards,
compared to only 12 of the untreated individuals. Use a normal probability distribution to
approximate the sampling distribution of P̂.
a) Construct a 99% confidence interval for the probability of “success” (=feeling better
afterwards) among those individuals taking the placebo.

• let p1 be the population success rate for those on the placebo

• p̂1 = 12
50 = 0.24
• CI for p1 :
r
p̂1 (1 − p̂1 )
ll: p̂1 − z 2
α
n
r
0.24(1 − 0.24)
= 0.24 − 2.57 ·
50

= 0.0848

r
p̂1 (1 − p̂1 )
ul: p̂1 + z α2
n
r
0.24(1 − 0.24)
= 0.24 + 2.57 ·
50

= 0.3952

• CI: [0.08, 0.40]

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 b) The company would like to report that taking the new drug improves the success prob-
ability to something greater than 0.5. Is this claim supported by the data at level
α = 0.05? State the hypotheses, rejection rule, empirical value of the test statistic,
p-value, and your conclusion.

• let p2 be the population success rate for those on the new drug
30
• sample proportion p̂2 = 50 = 0.6
• Define the hypotheses: H0 : p2 ≤ p0 = 0.5 vs. H1 : p2 > p0 = 0.5
• Select the test statistic: Z = q p̂p2 −p 0
(1−p )
∼ N(0, 1)
0 0
n
• Rejection rule: reject H0 if Z > zα = 1.64 (Since this is a right tailed
test we reject the null (H0 ) if the test statistic is greater than the
critical value)
• Calculate the empirical value of the test statistic:
pˆ2 − p0 0.6 − 0.5
Z=q = q = 1.4142
p0 (1−p0 ) 0.5·0.5
n 50

• p-value: p = P(z > 1.4142) = 1 − P(z ≤ 1.4142) = 1 − 0.921 = 0.079

• Test decision: Because the test statistic is lower than the critical
value, we cannot reject the null hypothesis. Alternative: since the
p-value is greater than α we also cannot reject the null.

4. A light bulbs manufacturer investigates whether a more efficient production technology de-
creases the variance in the life of its light bulbs (in years2 ).

Variance Sample size

Old technology 1.4 2100
New technology 0.9 41

Carry out an appropriate test supporting the manufacturers goal, give the hypotheses, degrees
of freedom, rejection rule, empirical value of the test statistic, and your conclusion. Use
α = 0.10.

• Define hypotheses: H0 : σ2 ≥ 1.4 vs. H1 : σ2 < 1.40

• Select the test statistic:
(n − 1)s2
χ2 = ∼ χ2n−1
σ20

• degrees of freedom: n − 1 = 41 − 1 = 40
• Rejection rule: reject H0 if χ2 < χ2α,n−1 = χ20.10,40 = 29.051
(This is a left-tailed test - therefore the test statistic needs to be
smaller than the critical value to reject H0 )
• Calculate the empirical value of the test statistic:

s2 (n − 1) 0.9 · (41 − 1)
χ2 = = = 25.7143
σ20 1.4

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• Test decision: Because the test statistic (25.71) is lower than the critical
value (29.051), the bulb manufacturer can reject the null hypothesis at the
10% significance level.

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 PRACTICE QUESTIONS

1. For each one of the following null hypotheses, find the corresponding alternative and deter-
mine whether it is a left-tailed, a right-tailed, or a two-tailed test.

1. p ≥ 0.10,
2. µ ≤ 0.5,
3. σ is at least 100,
4. µ ≤ −20,
5. p is exactly 0.22,
6. µ is at most 50,
7. and σ = 140.

The type of test is determined by the alternative hypothesis (H1 )

• H0 : p ≥ 0.10 vs. H1 : p < 0.10 → left-tailed

• H0 : µ ≤ 0.5 vs. µ > 0.5 → right-tailed
• H0 : σ ≥ 100 vs. H1 : σ < 100 → left-tailed
• H0 : µ ≤ −20 vs. H1 : µ > −20 → right-tailed
• H0 : p = 0.22 vs. H1 : p ̸= 0.22 → two-tailed
• H0 : µ ≤ 50 vs. H1 : µ > 50 → right-tailed
• H0 : σ = 140 vs. H1 : σ ̸= 140 → two-tailed