Deck 5: Foundations of Decision Making

Question 1

One assumption of bounded rationality is that managers usually make rational decisions.

Answer 1

True
Explanation: Bounded rationality assumes that managers are logical, objective, and fairly rational when they make decisions. However, since managers often don't have access to all of the relevant information for a given situation, they must bound their rationality within the limits of the information they actually have.

Question 2

A synonym for the word satisfice is maximize.

Answer 2

False
Explanation: The words satisfice and maximize are opposites rather than synonyms. When a manager does not have enough information to maximize, or find the best possible solution to a problem, he or she must compromise, or satisfice. When you satisfice, you accept not the best solution, but a solution that is "good enough."

Question 3

A rational decision will never fail to provide the best and most successful solution to a problem.

Answer 3

False
Explanation: A rational decision is logical and objective and will maximize the likelihood of solving a problem or achieving a goal. That said, a decision can be arrived at through a rational process and still be wrong due to the decision maker lacking complete information about the situation.

Question 4

Because heuristics simplify the decision-making process, they are unlikely to lead to errors.

Question 5

One assumption of bounded rationality is that managers can analyze all relevant information about all alternatives for a situation.

Question 6

Maximizing value means a decision will have the best possible outcome for the parties involved.

Question 7

Intuitive decision making cannot be a part of the rational decision-making process.

Question 8

The second step in the decision-making process is identifying a problem.

Question 9

In decision making, a problem can be defined as a discrepancy between what exists and what the problem solver desires to exist.

Question 10

The expression "throwing good money after bad" is an example of an escalation of commitment.

Question 11

A heuristic can simplify the decision-making process.

Question 12

Emotions should always be strictly ignored in a decision-making process.

Question 13

Intuitive decision making is systematic, logical, and orderly.

Question 14

All criteria are equally important in the decision-making process.

Question 15

The final step of the decision-making process is to implement the alternative that has been selected.

Question 16

Decision makers who seek information that matches what they already know are guilty of confirmation bias.

Question 17

A decision criterion defines factors that are relevant in a decision.

Question 18

A basketball coach who takes a very good shooter out of a game because she missed her last two shots has availability bias.

Question 19

Managers identify a problem by comparing the current state of affairs to some standard.

Question 20

Identifying the wrong problem is just as much a failure for a manager as identifying the right problem and failing to solve it.

Question 21

Which of the following defines a problem in the decision-making process?

A) a discrepancy between what exists and what the decision maker desires to exist
B) a discrepancy between the ideal and the practical
C) something that causes irritation
D) something that calls for attention

Question 22

A drawback of group decision making is groupthink.

Question 23

Creative solutions to problems are valued because they are new and different from traditional solutions.

Question 24

Uncertainty involves a situation in which the probability of a certain outcome is known to be small.

Question 25

An advantage of group decisions is that they increase the perception of the legitimacy of the solution.

Question 26

Most managerial decisions include an element of risk.

Question 27

A rule is simpler than a policy or a procedure to implement.

Question 28

Implementing a procedure requires more judgment and interpretation than implementing a policy.

Question 29

A manager can faithfully execute the decision-making process but still end up with nothing of value if ________.

A) he fails to identify the correct problem
B) he fails to assign number values to different criteria
C) he solves the problem inefficiently
D) he fails to correctly identify the steps of the process

Question 30

A country with high uncertainty avoidance and high power distance is more likely to engage in groupthink than a country with low uncertainty avoidance and low power distance.

Question 31

Managerial decisions are likely to become more programmed as managers rise in an organizational hierarchy.

Question 32

A manager is more confident of his or her assessment of a situation if it involves risk rather than uncertainty.

Question 33

The decision-making process consists of a series of eight steps that identify a problem and work toward ultimately ________.

A) determining if there is a solution to the problem
B) solving the problem
C) making a plan to solve the problem
D) breaking down the problem into a series of steps

Question 34

Decision making begins with ________.

A) selecting alternatives
B) identifying decision criteria
C) identifying a problem
D) eliminating false alternatives

Question 35

Two major advantages of electronic meetings are anonymity and honesty.

Question 36

Group decisions tend to provide more complete information than individual decisions.

Question 37

Groups tend to be more efficient and less effective than individual decision making.

Question 38

Programmed decisions tend to be routine.

Question 39

To identify a problem, a manager ________.

A) compares one set of standards or goals to a second set of standards or goals
B) looks for unhappy customers
C) uses intuition to see that things don't look right
D) compares the current state of affairs with some standard or goal

Question 40

A highway speed limit is an example of a policy.

Question 41

A manager is determining what kind of new computers she should purchase for her department. She has made a list of five different computer models for consideration. Which stage of the decision-making process is this?

A) selection of an alternative
B) identification of decision criteria
C) development of alternatives
D) analysis of alternatives

Question 42

Which of the following is NOT a common decision-making error or bias?

A) sunk costs
B) randomness
C) forest for the trees
D) overconfidence bias

Question 43

Which of the following is NOT assumed in a rational decision?

A) a clear and specific goal
B) a clear and unambiguous problem
C) most alternatives and consequences are known
D) value is maximized

Question 44

What does it mean for a decision maker to maximize value?

A) to make the decision to be as clear and logical as possible
B) to make the achievement of goals as likely as possible
C) to waste as little time and energy as possible
D) to make decision making as simple as possible

Question 45

A manager is considering purchasing new computers for her department. The manager spends time assessing the computers her department now has. Which stage of the decision-making process is she going through?

A) identification of a problem
B) identification of decision criteria
C) development of alternatives
D) implementation of an alternative

Question 46

One legislator sees decreased tax revenue as the key problem in the budget. A second legislator sees increased spending as the problem. Each of these legislators has a(n) ________.

A) representation bias
B) self-serving bias
C) availability bias
D) framing bias

Question 47

The three main models that managers use to make decisions are ________.

A) rational, bounded rational, and intuitive
B) rational, irrational, and bounded rational
C) intuitive, unintuitive, and rational
D) bounded rational, intuitive, and systematic

Question 48

A scientist cites two studies that show a positive effect for her drug and ignores five other studies that show a negative effect. Which error or bias is she committing?

A) hindsight
B) anchoring effect
C) confirmation bias
D) self-serving

Question 49

A banker opts for short-term gain despite indications that his decision might not pay off in the long run. Which error or bias is the banker guilty of?

A) overconfidence
B) immediate gratification
C) selective perception bias
D) representation

Question 50

In allocating weights to the decision criteria, which of the following is most helpful to remember?

A) All weights must be the same.
B) The total of the weights must equal 100.
C) The high score should be a 10, and no two criteria should be assigned the same weight.
D) Assign the most important criterion a score, and then assign weights against that standard.

Question 51

What is a heuristic?

A) a complicated and systematic method of decision making
B) a purely intuitive method of decision making
C) a totally unreliable method of decision making
D) a shortcut or rule of thumb that is used for decision making

Question 52

After purchasing new computers for her department, a manager is now comparing the performance of the new computers to the computers they replaced. Which stage of the decision-making process is she carrying out?

A) analysis of alternatives
B) evaluation of decision effectiveness
C) selection of an alternative
D) implementation of an alternative

Question 53

Which of the following is LEAST likely to be a decision criterion for a high-tech bicycle buyer who cares primarily about performance?

A) warranty
B) gear mechanism
C) frame composition
D) brake assembly

Question 54

A manager chooses to ignore a rigorous decision-making process and selects TV monitor A over monitor B because he "trusts" company A more than company B. If the decision he made was rational, which of the following is true?

A) Monitor A is really the better choice.
B) The manager should have included "trust" as a criterion.
C) Monitor B is really the better choice.
D) The manager must have made a mistake in calculating his weighted criteria.

Question 55

Maximizing value for an organization means making sure that ________.

A) the organization makes money
B) the best interests of the organization are addressed
C) the decision made is as rational as possible
D) the decision is as simple as possible

Question 56

Which of the following is NOT a reason why managers often resort to using heuristics?

A) They seem to eliminate complexity.
B) They seem to eliminate ambiguity.
C) They save time.
D) They thoroughly explore all alternatives.

Question 57

It is assumed that a rational decision maker ________.

A) would never make a wrong choice
B) would be subjective and impractical
C) would face only difficult decisions
D) would be objective and logical

Question 58

Because they are not systematic or comprehensive, using heuristics in place of an eight-step decision-making process can lead to ________.

A) errors and biases
B) consistently better decisions
C) more imaginative decisions
D) decisions that more directly solve problems

Question 59

Which of the following would be a fairly objective criterion by which a bicycle buyer could assess different bike models?

A) handling
B) weight
C) quality of craftsmanship
D) style

Question 60

For a high-tech bicycle buyer, decision criteria would be determined by ________.

A) whatever most bike buyers recommend
B) expert ratings in bike magazines
C) technical specifications
D) personal preferences of the buyer

Question 61

It is assumed that in most cases the decisions of all managers are limited by ________.

A) greed and short-sightedness
B) having too much information
C) not being able to analyze all information for all alternatives
D) not being able to act rationally or in the best interests of their organization

Question 62

Simon found that in making decisions, most people satisficed because they had limited ability to ________.

A) be truthful and honest in situations that deal with other people
B) think independently
C) deal with difficult situations
D) grasp present conditions and anticipate future conditions

Question 63

Neural networks outperform expert systems in uncovering ________.

A) credit card fraud
B) false positives for pregnancy
C) potential credit card customers
D) credit problems in bank mortgages

Question 64

Neural networks differ from expert systems in that they can ________.

A) draw conclusions from data
B) ask questions to the decision maker
C) perform sophisticated calculations
D) learn from experience

Question 65

Software programs that use a series of questions to aid humans in decision making are called ________.

A) text reading software
B) expert systems
C) group systems
D) support software

Question 66

Expert systems are primarily used to help what kinds of decision makers?

A) lower-level managers
B) top managers
C) senior managers
D) experts

Question 67

Which term best characterizes a decision that has bounded rationality?

A) virtually perfect
B) rigorous and comprehensive
C) not good enough
D) just good enough

Question 68

Which of the following is the best definition for the word satisfice?

A) very satisfying
B) not sufficient
C) accepts a less than perfect solution
D) requires a perfect solution

Question 69

A person who satisfices fails to ________.

A) maximize his or her decision
B) understand his or her position
C) accept the truth of a situation
D) make any kind of decision

Question 70

Structured problems are ________.

A) ambiguous
B) undefined and vague
C) clear and straightforward
D) incomplete

Question 71

Which model of decision making takes advantage of unconscious reasoning?

A) rational
B) nonrational
C) intuitive
D) factual

Question 72

Neural networks are able to outdo the performance of humans by ________.

A) analyzing symbols
B) handling up to three variables at once
C) handling hundreds of variables at once
D) reading facial expressions

Question 73

Intuitive decision making can complement ________.

A) rational decision making only
B) bounded rationality only
C) both rationality and bounded rationality
D) neither rationality nor bounded rationality

Question 74

How often do managers typically use intuitive decision making?

A) 100 percent of the time
B) almost never
C) almost all of the time
D) more than half of the time

Question 75

Which of the following is NOT a way in which intuition guides people who are making decisions?

A) Intuition provides ethics and values guidelines.
B) Intuition provides a formal analysis method.
C) Intuition provides experiences to draw from.
D) Intuition draws on knowledge, skills, and training.

Question 76

Compared to fully rational decision making, what is a major advantage of intuitive decision making?

A) total reliability
B) fully quantified
C) thoroughness
D) speed

Question 77

Escalation of commitment can occur when people don't ________.

A) want to make a decision
B) want to admit that an earlier decision was flawed
C) accept current conditions
D) understand that conditions have changed

Question 78

Herbert Simon won the Nobel Prize in economics for his work in describing ________.

A) how people spend money
B) how most people are perfectly rational
C) how people make decisions
D) how people avoid decisions

Question 79

Sticking to a decision despite evidence that it is a mistake is called ________.

A) escalation of commitment
B) escalation of rationality
C) satisficing commitment
D) error enhancement

Question 80

Emotions and feelings ________ decision making.

A) have no effect on
B) can improve
C) decrease performance in
D) are more important than facts and logic in