Past exam of the options I course of the University of Oxford / 2011 / O / 2 / a / Solution

The Neyman-Pearson lemma concerns testing a simple null density $f_0$ against a simple alternative $f_1$. A test that rejects where $f_1/f_0>c$, accepts where the ratio is below $c$, and if necessary randomizes on the boundary to have null rejection probability $\alpha$, is a most powerful test among tests of size at most $\alpha$. Thus a likelihood-ratio threshold maximizes power at the specified simple alternative. The boundary randomization is relevant for discrete distributions.