A fast food franchiser is considering building a restaurant

A fast food franchiser is considering building a restaurant at a certain location. According to a financial analysis, a site is acceptable only if the number of pedestrians passing the location averages more than 150 per hour. A random sample of 36 hours produced x = 160 and s = 30 pedestrians per hour.

a) Do these data provide sufficient evidence to establish that the site is acceptable? Use = 0.025.

b) What are the consequences of Type I and Type II errors? Which error is more expensive to make?

c) Considering your answer in part (b), if you could select an , would you select it to be large or small? Explain.

Solution