Directions: Show all your work. Indicate clearly the methods you use, because you will be graded on the correctness of your methods as well as on the accuracy of your results and explanation. When a law firm represents a group of people in a class action lawsuit and wins that lawsuit, the firm receives a percentage of the group's monetary settlement. That settlement amount is based on
the total number of people in the group-the larger the group and the larger the settlement, the more money the firm will receive. A law firm is trying to decide whether to represent car owners in a
class action lawsuit against the manufacturer of a certain make and model for a particular defect. If 5 percent or less of the cars of this make and model have the defect, the firm will not recover its
expenses. Therefore, the firm will handle the lawsuit only if it is convinced that more than 5 percent of cars of this make and model have the defect. The firm plans to take a random sample of 1,000
people who bought this car and ask them if they experienced this defect in their cars.
a. Define the parameter of interest and state the null and alternative hypotheses that the law firm should test.
b. In the context of this situation, describe Type I and Type Il errors and describe the consequences of each of these for the law firm.