Let theta be the unknown market share that a company has for its primary product. Instead of using a continuous distributionfor the prior, assume that there are only two possible values for theta:

H0: theta = 0.6; HA: theta = 0.8

Assume that the probability of the null hypothesis being true is 0.65, thatthe cost of a type 1 error is R1000, and that the costof a type two error is R2500.

Which statement below is correct?

• A.

Do not reject H0 because the ratio of the posteriors is greater than the a priori odds multiplied by the ratio of the costs.

• B.

Do not reject H0 because the ratio of the likelihoods is less than the a priori odds multiplied by the ratio of the costs.

• C.

Reject H0 because the ratio of the likelihoods is smaller than the a priori odds multiplied by the ratio of the costs.

• D.

Reject H0 because the ratio of the likelihoods is greater than the a priori odds multiplied by the ratio of the costs.