Question: The U.S. Food and Drug Administration (FDA) is responsible for approving new drugs. Many consumer groups feel that the approval process is too easy and, therefore, too many drugs are approved that are later found to be unsafe. On the other hand, a number of industry lobbyists are pushing for a more lenient approval process so that pharmaceutical companies can get new drugs approved more easily and quickly (R. Sharpe, FDA Tries to Find Right Balance on Drug Approvals, The Wall Street Journal, April 20, 1999, p. A24). Consider a null hypothesis that a new, unapproved drug is unsafe and an alternative hypothesis that a new, unapproved drug is safe.

a. Explain the risks of committing a Type I or Type II error.

b. Which type of error are the consumer groups trying to avoid? Explain.

c. Which type of error are the industry lobbyists trying to avoid? Explain.

d. How would it be possible to lower the chances of both Type I and Type II errors?