Mechanic

Which of the following is the correct sequence of events for testing a hypothesis?

A) State the hypothesis, select the level of significance, formulate the decision rule, compute the test statistic, and make a decision.

B) State the hypothesis, select the level of significance, compute the test statistic, formulate the decision rule, and make a decision.

C) State the hypothesis, formulate the decision rule, select the level of significance, compute the test statistic, and make a decision.

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Depending upon the author there can be as many as seven steps in hypothesis testing which are:

• Stating the hypotheses.
• Identifying the test statistic and its probability distribution.
• Specifying the significance level.
• Stating the decision rule.
• Collecting the data and performing the calculations.
• Making the statistical decision.
• Making the economic or investment decision.

Mechanic

Which of the following statements least describes the procedure for testing a hypothesis?

A) Compute the sample value of the test statistic, set up a rejection (critical) region, and make a decision.

B) Develop a hypothesis, compute the test statistic, and make a decision.

C) Select the level of significance, formulate the decision rule, and make a decision.

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Depending upon the author there can be as many as seven steps in hypothesis testing which are:

• Stating the hypotheses.
• Identifying the test statistic and its probability distribution.
• Specifying the significance level.
• Stating the decision rule.
• Collecting the data and performing the calculations.
• Making the statistical decision.
• Making the economic or investment decision.

Mechanic

The first step in the process of hypothesis testing is:

A) to state the hypotheses.

B) selecting the test statistic.

C) the collection of the sample.

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The researcher must state the hypotheses prior to the collection and analysis of the data. More importantly, it is necessary to know the hypotheses before selecting the appropriate test statistic.

Mechanic

In the process of hypothesis testing, what is the proper order for these steps?

A) State the hypotheses. Specify the level of significance. Collect the sample and calculate the test statistics. Make a decision.

B) Collect the sample and calculate the sample statistics. State the hypotheses. Specify the level of significance. Make a decision.

C) Specify the level of significance. State the hypotheses. Make a decision. Collect the sample and calculate the sample statistics.

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The hypotheses must be established first. Then the test statistic is chosen and the level of significance is determined. Following these steps, the sample is collected, the test statistic is calculated, and the decision is made.

Mechanic

Susan Bellows is comparing the return on equity for two industries. She is convinced that the return on equity for the discount retail industry (DR) is greater than that of the luxury retail (LR) industry. What are the hypotheses for a test of her comparison of return on equity?

A) H0: µDR = µLR versus Ha: µDR ≠ µLR.

B) H0: µDR ≤ µLR versus Ha: µDR > µLR.

C) H0: µDR = µLR versus Ha: µDR < µLR.

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The alternative hypothesis is determined by the theory or the belief. The researcher specifies the null as the hypothesis that she wishes to reject (in favor of the alternative). Note that this is a one-sided alternative because of the “greater than” belief.