Suppose you work for a company that produces cables, and wish to state that less than 0.1% (0.001) of your cables are defective.
a. How many observations must you take so that you can use the normal approximation?
b. Using Minitab, generate a set of n observations from a binomial distribution with 1 trial and an event probability of 0.002, where n is your answer from
10a. Using the normal approximation, calculate the test statistic and rejection criteria (by hand/calculator).
c. Using your answers to 10b, conduct a hypothesis test to determine if the probability is equal to 0.001 or not equal to 0.001. Given that you know the actual event probability is 0.002, is the answer given by your hypothesis test correct or incorrect?
d. Check your answer by conducting the same hypothesis test using Minitab and the normal approximation. What is the p-value of the test statistic?