When a new drug is formulated, the pharmaceutical company must subject it to lengthy and involved testing before receiving the necessary permission from the Food and Drug Administration (FDA) to market the drug. The FDA requires the pharmaceutical company to provide substantial evidence that the new drug is safe for potential consumers.
a. 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?
b. Given the choice of null and alternative hypotheses in part a , describe Type I and Type II errors in terms of this application. Define a and b in terms of this application.
c. If the FDA wants to be very confident that the drug is safe before permitting it to be marketed, is it more important that a or b be small? Explain.