- CFA Exams
- CFA Level I Exam
- Topic 1. Quantitative Methods
- Learning Module 8. Hypothesis Testing
- Subject 6. The Decision Rule
CFA Practice Question
A consumer group wants to prove that the average hospital costs are more than $931 per day. If the decision is to fail to reject H0: μ < 931, the conclusion should be that ______.
B. the average daily cost of the hospital is less than $931.
C. there is no evidence that the average daily cost of the hospital is more than $931.
A. there is no evidence that μ < 931.
B. the average daily cost of the hospital is less than $931.
C. there is no evidence that the average daily cost of the hospital is more than $931.
Correct Answer: C
Failing to reject H0: μ <= 931 means that there is no evidence that the statement μ <= 931 is false. So, there is no evidence that the statement μ > 931 is true. In terms of this problem, this means that there is no evidence that the average daily cost of the hospital is more than $931.
User Contributed Comments 5
| User | Comment |
|---|---|
| ambar | See the difference between Q1, 2 and 3 |
| johntan1979 | Type II error... no conclusive evidence. |
| johntan1979 | Also, failing to reject null is not the same as accepting null. |
| lndcobra | In the question H_0 is μ < 931, and they fail to reject it, so C is also incorrect, as it could mean that hospital costs equal to 931 (μ = 931) |
| wpaxtonn21 | @johntan1979 this is not a type II error. |