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How to choose a significance level for a hypothesis test

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If you were a manager of a firm making a hypothesis test and the rejection of Ho would mean the firm would have to be liquidated, would you favor a large or small value for the significance level? Explain.

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Solution Summary

This is a conceptual question about whether one should select a higher significance level or a smaller significance level in the given context of the problem i.e. when rejection of the hypothesis would mean liquidation of the firm. This post provides conceptual clarity to students when selecting a significance level for their problems.

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Smaller the value of the significance test, larger will be the confidence interval and hence lower will be the chances of ...

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