Question 1

Which theory examines risk assessment, loss aversion, and dependence on a reference or starting point, and explains why individuals consistently behave in ways different from what traditional economic and decision theory would predict?

Accepted Answer

Prospect theory examines risk assessment, loss aversion, and dependence on a reference or starting point, and explains why individuals consistently behave in ways different from what traditional economic and decision theory would predict. Game theory examines strategic behavior and decision making in interdependent situations, while probability theory deals with the quantification of uncertainty and random events. The administrative theory of individual decision making studies how individuals make decisions within organizations.

Question 2

_____ occurs when a person relies on one piece of information as the key to decision making.

Accepted Answer

Anchoring occurs when a person relies too heavily on the first piece of information they receive when making a decision, even if it's irrelevant or only partially applicable. This can lead to biased decision making.

Question 3

''Sensors'':

Accepted Answer

Sensors rely on gathering facts and empirical evidence to make deductions and draw conclusions. They prefer to rely on concrete information rather than abstract ideas or intuition.

Question 4

In more hierarchical cultures, only very senior managers make decisions.

Accepted Answer

In more hierarchical cultures, decision-making power is typically centralized in senior managers and top leaders, with lower-level employees having little to no input or autonomy in the decision-making process.

Question 5

The impact of bounded rationality is greatest when trying to make _____ decisions, and can be viewed along a continuum of rationality.

Accepted Answer

Bounded rationality refers to the limitations in decision-making due to incomplete information, time constraints, and cognitive limitations. Nonprogrammed decisions are typically complex, unstructured, and require a high level of cognitive processing, making them the most impacted by bounded rationality. Intuitive, heuristic, and structured decisions may also be impacted but to a lesser extent.

Question 6

A decision that follows standard operating procedures, and where there is no need to explore alternative solutions because the optimal solution has already been identified and documented is a(n):

Accepted Answer

A programmed decision refers to a decision that can be made by following a well-established set of standard procedures or rules. In this case, there is no need to explore alternative solutions as the optimal solution has already been identified and documented. Hence, option A is the correct answer.

Question 7

Group decisions are more effective than individually directed decisions when the decision involves a short-range forecast.

Accepted Answer

Group decisions are generally more effective for complex problems requiring a variety of perspectives, but individually directed decisions can be more efficient and just as effective for short-range forecasts or simpler problems.

Question 8

Situation-accepting managers are likely to believe that they themselves are the prime or only influence on the same process.

Accepted Answer

Situation-accepting managers are more likely to acknowledge the influence of external factors, circumstances or situations beyond their control on the process, rather than believing themselves to be the only or prime influence.

Question 9

When bounded rational decision makers focus on alternatives that are ''good enough'' rather than on finding the best possible solution, they engage in:

Accepted Answer

Satisficing is the process of selecting the first solution that meets a minimum set of criteria, rather than aiming for the optimal solution. Bounded rational decision makers, who face limitations in time, information, and cognitive abilities, often adopt this strategy to simplify the decision-making process and quickly arrive at a satisfactory outcome. Heuristics refer to mental shortcuts or rules of thumb that simplify decision making, while programmed and non-programmed decision making refer to decisions that can be made based on pre-established routines or require a unique approach, respectively.

Question 10

In prospect theory, _____ refers to the fact that people will forgo a superior choice (a potential benefit) to avoid a loss.

Accepted Answer

Loss aversion is the tendency for people to strongly prefer avoiding losses than acquiring gains. This can lead people to turn down superior choices because they want to avoid the possibility of a loss. The other options don't accurately describe this phenomenon in prospect theory.

Question 11

Someone who argues against the decision being contemplated, allowing the rationale for the decision to be checked is a:

Accepted Answer

A devil's advocate is someone who raises objections or arguments against an idea in order to stimulate debate and test the strength of the idea being considered. This allows the rationale for the decision to be checked and helps prevent group-think, where a group may make a decision without enough critical evaluation. A collaborator works together with others to achieve a common goal, a group facilitator guides group discussions, and a group-thinker is a negative term referring to a group that uncritically accepts ideas without considering alternatives.

Question 12

This method which requires the firm to think about what would happen if a significant environmental condition changed, and what the organization should do to anticipate and react to such an outcome is called:

Accepted Answer

The method described in the question is called scenario planning, which involves considering different possible scenarios or futures and planning accordingly.

Question 13

A process of information search and decision-making that starts with the presumed answer to the decision and proceeds to only seek out information that confirms the initial verdict or decision is:

Accepted Answer

A verdict-based information search, also known as confirmation bias, is a tendency to seek out information that confirms pre-existing beliefs or decisions while ignoring opposing evidence. This can lead to a narrow-minded decision-making process and potentially flawed conclusions.

Question 14

In choosing the best alternative:

Accepted Answer

The selection criteria must be ranked by importance and given a weighted rating to ensure that the best alternative is chosen. This approach helps decision makers to objectively evaluate each alternative based on its importance and impact on the organization's goals and objectives. It also ensures that decision makers are able to allocate resources effectively and efficiently towards the implementation of the chosen alternative.

Question 15

Cognitive diversity is the ability of members of the group to think differently, and to express their opinions and findings.

Accepted Answer

Cognitive diversity refers to diversity in ways of thinking, perspectives, approaches and problem-solving methods, and the ability of group members to express their unique perspectives and ideas.

Question 16

New, complex, or abstract problems require _____ decisions, wherein decision makers must search for alternatives and possibly craft a unique solution.

Accepted Answer

Nonprogrammed decisions involve dealing with new, complex, or abstract problems where there may not be a clear or pre-defined solution. Decision makers must use judgment, creativity, and problem-solving skills to search for alternatives and potentially come up with a unique solution. Heuristic decision making involves using rules of thumb or shortcuts to simplify decision making, while satisficing involves choosing the first acceptable solution rather than searching for the optimal one. Intuitive decision making relies on the decision maker's instinct or gut feeling.

Question 17

According to the administrative theory of individual decision making, people do not have the ability to process all of the information and solutions that face them, which leads them to limit their problems and solutions. This is known as:

Accepted Answer

Bounded rationality refers to the idea that individuals have limitations in their decision-making abilities due to cognitive limitations and the complexity of problems they face. As a result, people tend to satisfice, meaning they choose the first acceptable solution rather than exhaustively searching for the best one. Uncertainty refers to a lack of knowledge or information about a situation, and devil's advocacy is a technique used to challenge assumptions and ideas in decision-making processes. Therefore, the best choice is C, bounded rationality.

Question 18

Which of the following statements about the normative model of decision making is true?

Accepted Answer

The normative model of decision making is a prescriptive model that outlines how decisions should be made using a rational approach, rather than describing how people actually make decisions (A), nor is it a model that has been idealized or improved upon (C). It is not the actual, day-to-day decision-making model used by individuals (D).

Question 19

Which of the following is arguably the most important step in rational decision making?

Accepted Answer

Problem identification is arguably the most important step in rational decision making because it lays the foundation for the rest of the decision-making process. Without a clear understanding of the problem or issue at hand, it is difficult to generate potential solutions or make a decision that effectively addresses the problem. Furthermore, an unclear or incorrect problem identification can lead to wasted effort and resources in generating solutions that do not actually address the underlying issue.

Question 20

It is commonly believed that when using a group to make a decision, a simple agreement or consensus will be reached.

Accepted Answer

The answer of It is commonly believed that when using...

Quiz 9: Decision Making