Question: Fuel Consumption and Cars Biodiesel fuels are made from vegetable oils or animal fats and may be used instead of conventional diesel fuel. One advantage to using biodiesel is a possible decrease in regulated emissions, specifically total hydrocarbons (HC). Using the heavy-duty transient Federal Test Procedure (FTP), the mean HC emission is 0.23 g/hp-hr (grams per horsepower-hour) with standard deviation σ = 0.07. A random sample of heavy-duty engines was obtained, and each was tested with biodiesel fuel. The resulting HC measurements are given in the table below.
a. Suppose the underlying population is normal. Is there any evidence to suggest the use of biodiesel has decreased the mean level of HC emissions? Use a = 0.01.
b. Suppose a company is thinking about building a $20 million biodiesel fuel production facility. The company will invest the money only if there is overwhelming evidence in favor of decreased HC emissions. Which error (type I or type II) is more important to the fuel company? Would the company prefer a smaller or a larger significance level? Justify your answer.