[Objective: Understand the Components of Hypothesis Testing] a Quality Control

question 41

Multiple Choice

[Objective: Understand the components of hypothesis testing] A quality control manager believes that there are too many defective light bulbs being produced, higher than the advertised rate. The manager's null hypothesis is that the production line of light bulbs has a defect rate of p=0.025 (the light bulb's stated defect rate) . He does a hypothesis test with a significance level of 0.05. Symbolically, the null and altemative hypothesis are as follows:
Choose the statement that best describes the significance level in the context of the hypothesis test.

• A) The significance level of 0.05 is the defect rate we believe is the true defect rate.
• B) The significance level of 0.05 is the probability of concluding that the defect rate is higher than 0.025 when in fact the defect rate is equal to 0.025.
• C) The significance level of 0.05 is the probability of concluding that the defect rate is equal to 0.025 when in fact it is greater than 0.025.
• D) The significance level of 0.05 is the test statistic that we will use to compare the observed outcome to the null hypothesis.

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Definitions:

Stockholders' Equity

The residual interest in the assets of a company after deducting liabilities, representing the owners' claim on the business.

IFRS

International Financial Reporting Standards, a set of accounting standards developed by the International Accounting Standards Board (IASB) for financial reporting globally.

Convertible Preferred Stock

A type of preferred stock that gives the holder the right to convert their shares into a predetermined number of common stock shares, usually after a specific date.

Noncumulative Preferred Stock

Preferred shares that do not entitle the holder to claim dividends missed in the past if the company decides not to distribute dividends in a given year.