Ads A company is willing to renew its advertising contract with a city’s public transportation operator only if the operator can prove that more than 23% of the residents of the city have seen their advertisement posters/billboards during a given week.

The transportation operator conducts a survey among 500 randomly selected public transportation users.

a) What are the hypotheses?

b) The operator plans to conduct this test using a 10% level of significance, but the company wants the significance level lowered to 5%. Why?

c) What is meant by the power of this test?

d) For which level of significance will the power of this test be higher? Why?

e) They finally agree to use a = 0.05, but the company proposes that the operator surveys 620 people instead of the 500 initially proposed. Will that make the risk of Type II error higher or lower? Explain.