Final answer:
It is true that the cost recovery limits for luxury autos can change when the mid-quarter cost method is used. Type I and Type II errors refer to the incorrect rejection or failure to reject a true null hypothesis, respectively, as applied in statistical tests.
Step-by-step explanation:
The statement that the "luxury auto" cost recovery limits change if mid-quarter cost is used is true. When applying the mid-quarter convention, the depreciation limits on luxury automobiles may differ from the standard limits.
This is due to specific rules that apply when a certain percentage of a business's property is placed in service during the last quarter of the tax year.
A Type I error occurs when we reject the null hypothesis when it is actually true. In the context of the mean price of mid-sized cars, a Type I error would happen if we conclude that the mean price is not $32,000 when, in fact, it is.
Conversely, a Type II error occurs when we fail to reject the null hypothesis when it is false. This would happen if we accept that the mean price is $32,000 when the actual mean price is different.