A Company Manufacturing Computer Chips Finds That 8% of All

question 20

Essay

A company manufacturing computer chips finds that 8% of all chips manufactured are defective. Management is concerned that employee inattention is partially responsible for the high defect rate. In an effort to decrease the percentage of defective chips, management decides to offer incentives to employees who have lower defect rates on their shifts. The incentive program is instituted for one month. If successful, the company will continue with the incentive program.
-In this context describe a Type I error and the impact such an error would have on the company.

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Definitions:

Government

The organization that is the governing authority of a political unit, the ruling power in a political society, and the apparatus through which a governing body functions and exercises authority.

Price Ceiling

A government-imposed limit on how high a price can be charged on a product or service, intended to protect consumers from market conditions that could make commodities unaffordable.

Equilibrium Price

The price at which the quantity of a good or service supplied is equal to the quantity demanded.

Surplus

An excess amount of something, especially in the context of production and supply exceeding demand in economics, leading to a situation where the quantity supplied is greater than the quantity demanded.