A fast-food company is considering building a restaurant at a certain location. Based on financial analyses, a site is acceptable only if the number of pedestrians passing the location averages more than 110 per hour. The number of pedestrians observed for each of 40 different one-hour periods. The number of pedestrians was then recorded to be 114.8. Assume that the population standard deviation is known to be 16.
a. State the null and alternative hypotheses.
b. Can we conclude at the 5% significance level that the site is acceptable? How do you know?
c. Please state which type of error (Type I or Type II) may be committed here? Consider your conclusion in part (b) of this question and explain your answer. Also, what are the implications of committing such error?