A Large University Claims That the Average Cost of Housing

question 14

Essay

A large university claims that the average cost of housing within three miles of the campus is $6900 per school year. A high school student is preparing her budget for her freshman year at the university. She is concerned that the university's estimate is too low. Having taken AP Statistics, she decides to perform the following test of hypothesis: H₀: = 6900 versus H_a: > 6900, where represents the average cost of housing per year within three miles of the university.
Describe the Type I error for this problem.
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Describe the Type II error for this problem.
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Which error has more serious consequences for the student?
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Definitions:

Long-Run Supply Curve

A graphical representation showing how the quantity of goods supplied by firms changes over time as all factors of production can be varied.

Decreasing-Cost Industry

An industry in which the costs of production decrease as the industry expands, often due to efficiencies gained from economies of scale.

Technologically Progressive Industry

An industry characterized by rapid and continuous technological innovation, leading to dynamic growth and evolution of its products and services.

Long-Run Supply Curve

A graphical representation showing the quantities of a good or service that a firm is willing and able to supply at different prices over a period where all inputs can be varied.