Question

4. An NGO dealing with labour rights in a city has been claiming that an average construction worker

in the city has no more than Rs.25,000 of personal life insurance. The Labour Welfare Department

of the local administration believes that this is not true and sets out to prove that an average

construction worker in the city has more than Rs.25,000 of personal life insurance. To test this

claim, Labour Welfare Department randomly samples 100 construction workers in the city and

interviews them about their personal life insurance coverage. It discovers that the average amount

of personal life insurance coverage for this sample group is Rs.26,650. The population standard

deviation is Rs.12,000.

Consider the above situation and answer the following questions with suitable explanation.

(a) Determine whether the test shows enough evidence to reject the null hypothesis posed by the

NGO. Assume the probability of committing a Type I error is 0.05.

(b) If the actual average for this population is Rs.30,000, what is the probability of committing a

Type II error?​

Answer 1

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