Which of the following is the first step in the hypothesis testing process?

• A. Calculate the test statistic
• B. Formulate the null and alternative hypotheses
• C. Determine the level of significance
• D. Make a decision based on the p-value

Answer: (B)

Verified step by step guidance

1. Understand the purpose of hypothesis testing: Hypothesis testing is a statistical method used to make decisions or inferences about a population based on sample data.
2. Step 1 in the hypothesis testing process is to formulate the null hypothesis (H₀) and the alternative hypothesis (H₁). The null hypothesis represents the default assumption or status quo, while the alternative hypothesis represents the claim or effect being tested.
3. Clearly define the null and alternative hypotheses based on the context of the problem. For example, if testing whether a new marketing strategy increases sales, H₀ might state 'The new strategy does not increase sales,' and H₁ might state 'The new strategy increases sales.'
4. After formulating the hypotheses, proceed to determine the level of significance (α), which is the probability threshold for rejecting the null hypothesis. Common values for α are 0.05 or 0.01, depending on the desired confidence level.
5. Once the hypotheses and significance level are established, the next steps involve calculating the test statistic, determining the p-value, and making a decision based on the comparison of the p-value to the significance level.