Consumers risk and producers risk

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Reference no: EM13108378

A manufacturer of handheld calculators receives very large shipments of printed circuits from a supplier. It is too costly and time-consuming to inspect all incoming circuits, so when each shipment arrives, a sample is then used to test H0: pi = 0.05 versus HA: pi > 0.05, where is the true proportion of defectives in the shipment. If the null hypothesis is not rejected, the shipment is accepted, and the circuits are used in the production of the calculators. If the null hypothesis is rejected, the entire shipment is returned to the supplier due to inferior quality. (A shipment is defined to be of inferior quality if it contains more than 5% defectives.)

a) In this context, define type I and type II errors.

b) From the calculator manufacturer?s point of view, which type of error would be considered more serious and explain why?

c) From the printed circuit supplier?s point of view, which type of error would be considered more serious and explain why?

Reference no: EM13108378

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