Final answer:
In hypothesis testing, if the null hypothesis is rejected even though it is true, a Type I error occurs. In this scenario, a Type I error has occurred as the null hypothesis was rejected and the true mean is 17 units.
Step-by-step explanation:
This question is related to hypothesis testing. The null hypothesis (H0) states that the average demand per month is less than or equal to 34 units (μ ≤ 34). The alternative hypothesis (H1) states that the average demand per month is greater than 34 units (μ > 34). In this scenario, if the null hypothesis is rejected and the true mean is 17 units, a Type I error has occurred. This means that the null hypothesis was rejected even though it was actually true. Type I errors are considered more serious in hypothesis testing as they can lead to incorrect decisions or conclusions.