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Statistics and Probability

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Determining a Critical Value: Testing a Null Hypothesis

STATS-RFYGXN

You work for a pharmaceutical company that is developing a new drug for respiratory distress syndrome in premature infants. You are testing the null hypothesis that the drug is safe.

Knowing that the drug may offer a slight benefit but has potentially life-threatening side effects, what would be the optimal level of $\alpha$ to use for this test?

A

$0.05$

B

$0.01$

C

$0.001$

D

$0.025$