Explanation:
A p-value of 0.01 means there is about a 1% chance of seeing a result at least this extreme just by random chance under the null. A Type I error happens when we reject a true null hypothesis, and the long-run rate of that error is set by the significance level (α) you choose. So if you use α = 0.01, you would reject the null when p ≤ 0.01, and your procedure is designed to have about a 1% Type I error rate over many repeated samples (when the null is true).
(Book 2, Module 17.2, LO 17.e)
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Question 99
A risk analyst recently joined the market research department of Marketing MegAlytics. Her primary charge is to perform statistical analysis on data relevant to clients considering entry into new market opportunities. Hypothesis tests are a primary tool used to convince clients of the statistical significance of any particular analysis. One of the metrics clients struggle to understand is the p-value and how it relates to a Type I error. The analyst has formulated a plain response recommended for communication. Which of the following is an appropriate response that can be used to communicate the relationship between p-value and Type I errors?
A
A p-value of 0.01 indicates the statistical result has high power.
B
A p-value of 0.01 indicates the statistical result has low power.
C
A p-value of 0.01 indicates that the result would be significant at the 1% level.
D
A p-value of 0.01 indicates a Type I error will be committed 1 out of a 10,000 times.
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