Pharmaceutical companies spend billions of dollars per year on research and development of new drugs. The pharmaceutical company must subject each new drug to lengthy and involved testing before receiving the necessary permission from the Food and Drug Administration (FDA) to market the drug. The FDA's policy is that the pharmaceutical company must provide substantial evidence that a new drug is safe prior to receiving FDA approval, so that the FDA can confidently certify the safety of the drug to potential consumers.

1.If the new drug testing were to be placed in a test of hypothesis framework, would the null hypothesis be that the drug is safe or unsafe? The alternative hypothesis? (In an actual test, "safety" could be quantified using population parameters.) Fill in the blanks below.

The null hypothesis would be that the drug is

Select an answer

unsafe

safe

and the alternative hypothesis would be that the drug is

Select an answer

safe

unsafe

.

2. Describe the Type I and Type II errors in terms of this application. Fill in the blanks below.

The Type I error for this problem would be to conclude that the drug is

Select an answer

safe

unsafe

when the drug is actually

Select an answer

safe

unsafe

The Type II error for this problem would be to conclude that the drug is

Select an answer

unsafe

safe

when the drug is actually

Select an answer

unsafe

safe

.

Recall:is the probability of making a Type I error andis the probability of making a Type II error.

3. If the FDA wants to be very confident that the drug is safe before permitting it to be marketed, is it more important thatorbe small?

• The value ofshould be minimized to minimize the risk of falsely concluding the drug is not safe when it is safe and could help people.
• The value ofshould be minimized to minimize the risk of falsely concluding the drug is safe when it is not safe and could hurt people.
• The value ofshould be minimized to minimize the risk of falsely concluding the drug is safe when it is not safe and could hurt people.
• The value ofshould be minimized to minimize the risk of falsely concluding the drug is not safe when it is safe and could help people.