A newspaper publisher is considering launching a new "national" newspaper in Anytown.

1. A newspaper publisher is considering launching a new "national" newspaper in Anytown. It is believed

that the newspaper would have to attract over 12% of all newspaper readers in order to be successful and

not go out of business. During the planning stages of this newspaper, a market survey was conducted of

a sample of 400 readers. After providing a brief description of the proposed newspaper, one question

asked if the survey participant would subscribe to the newspaper at its planned cost of $20 per month.

Suppose that 58 participants said they would subscribe.

a) (2.5pts) Can the publisher conclude that the proposed newspaper will be financially viable? Perform

the appropriate test at a 1% level of significance.

b) (1pt) Suppose the actual value of the overall proportion of readers who would subscribe to this

newspaper is 0.13. Was the decision made in part (a) correct? If not, what type of error was made?

c) (2pts) State the meaning of a Type I and a Type II error in the context of this scenario.

d) (2pts) The publisher decided to run the above hypothesis test at a 1% level of significance. In a

paragraph explain why the publisher might choose to run the test at a this level of significance

instead of a higher value of α . (It may be helpful to think about the meaning of α and β from part

(c)).