Duke Energy reported that the cost of electricity for an efficient home in a particular neighborhood of Cincinnati, Ohio, was $104 per month (Home Energy Report, Duke Energy, March 2012). A researcher believes that the cost of electricity for a comparable neighborhood in Chicago, Illinois, is higher. A sample of homes in this Chicago neighborhood will be taken and the sample mean monthly cost of electricity will be used to test the following null and alternative hypotheses.
H0: μ ≤ 104
Ha: μ > 104
a. Assume the sample data led to rejection of the null hypothesis. What would be your conclusion about the cost of electricity in the Chicago neighborhood?
b. What is the Type I error in this situation? What are the consequences of making this error?
c. What is the Type II error in this situation? What are the consequences of making this error?