Question 1

After the city of Washington, D.C announced it was raising the minimum wage to $12.50 per hour, WalMart halted construction of a supercenter there, despite having already invested years in negotiations with the City and tens of thousands of dollars in construction. The top managers at WalMart remembered the importance of ________.

Accepted Answer

WalMart's decision to halt construction of a supercenter in Washington, D.C after the minimum wage was raised demonstrates their recognition of when to call it quits, as it was no longer economically viable for them to continue investing in the project.

Question 2

Whenever anyone praises Mark for his good performance, he has the tendency to attribute his success to his personal qualities such as his ability to thrive under pressure and his eye for detail. However, any negative performance feedback is always met with excuses such as unsupportive team members or insufficient time. This is an example of the ________.

Accepted Answer

This behavior is a classic example of self-serving bias, which refers to the tendency of individuals to attribute their successes to their personal qualities while blaming external factors for their failures. Mark is taking credit for positive outcomes but deflecting responsibility for negative ones, which is a common manifestation of this bias. Confirmation bias (B) is a different phenomenon that refers to the tendency to seek out information that confirms one's existing beliefs or biases. Representation bias (C) is not a recognized psychological term. Hindsight bias (D) refers to the tendency to view past events as more predictable or inevitable than they actually were. While Mark's behavior may involve hindsight bias, it is primarily an example of self-serving bias.

Question 3

Explain any five decision biases or errors that managers make.

Accepted Answer

The answer of Explain any five decision biases or errors...

Question 4

The last time he flew Jet Value Air, Juan's plane developed a fuel leak and had to make an emergency landing. The time before that, his plane was grounded because of an electrical problem. Juan is sure his current trip will be fraught with problems and he will once again be delayed. This is an example of the ________ bias

Accepted Answer

The answer of The last time he flew Jet Value...

Question 5

The Prime Minister of Transylvania prefers darkened rooms, flinches in bright light, and has unusually long incisors. Despite his long and successful career, his political opponents claim he is a vampire. This is an example of the ________.

Accepted Answer

This is an example of selective perception bias, which refers to the tendency for individuals to selectively interpret and remember information in a way that supports their preconceived beliefs or expectations. In this case, the political opponents are interpreting the Prime Minister's physical characteristics in a way that fits their belief that he is a vampire, rather than objectively considering alternative explanations.

Question 6

The decisions many managers make in today's business world typically involve ________.

Accepted Answer

Managers in today's business world often face situations with a level of risk, incomplete information, and time pressure. This is because of the fast-paced nature of business, the uncertainty of the market, and the need for quick and effective decision-making. Managers must be able to manage risk and make decisions with incomplete information, while also being able to do so in a timely manner to stay competitive.

Question 7

The last time the Whigs took over Congress, stock prices rose dramatically and unemployment fell to record lows. Once again, the Whigs are in power, so Jason expects his stock portfolio to grow significantly. Jason's thinking may be influenced by the ________.

Accepted Answer

Jason's thinking is influenced by the representation bias, which occurs when people make judgments about the probability of an event under uncertainty based on how much one event resembles another event. In this case, Jason expects the same economic outcomes based on the Whigs being in power again, assuming that the situation is representative of the past without considering other factors that could influence the outcome.

Question 8

The anchoring effect describes when decision makers fixate on initial information as a starting point and then, once set, fail to adequately adjust for subsequent information.

Accepted Answer

The statement correctly defines the anchoring effect as a cognitive bias that causes individuals to rely too heavily on the initial piece of information when making subsequent decisions, even if new information contradicts or overrides the initial data. This can lead to errors in judgment or decision-making because people fail to update or revise their beliefs based on the most relevant and reliable data. The anchoring effect is a well-documented phenomenon in behavioral economics, psychology, and marketing research, and it can have implications for many areas of life, from negotiation and pricing to investment and healthcare decisions.

Question 9

The ________ occurs when decision makers select and highlight certain aspects of a situation while excluding others.

Accepted Answer

Framing bias occurs when decision makers highlight certain aspects of a situation while excluding others. This can be done intentionally or unintentionally and can significantly influence the decisions made. Option B) availability bias refers to the tendency to rely heavily on the information that is readily available while making decisions. Option C) representation bias is a tendency to rely on representations of events rather than the actual events when making judgments or decisions. Option D) confirmation bias is the tendency to look for information that supports pre-existing beliefs or ideas, rather than being open to new information or ideas.

Question 10

A few decades ago, Walmart opened stores in Germany. After a few years, it closed all of them. The shopping habits of Europeans differed so much from that of Americans that the stores could not become profitable. What was Walmart's mistake?

Accepted Answer

Walmart's mistake was not understanding cultural differences, which resulted in them not being able to adapt to the shopping habits of Europeans.

Question 11

The sunk costs error occurs when decision makers forget that current choices cannot correct the past.

Accepted Answer

The sunk costs error refers to the tendency of decision makers to continue investing resources in a project or course of action based on the time, money, or effort already invested, even if the future benefits are low or non-existent. This error occurs when decision makers fail to realize that sunk costs are irretrievable and should not influence current choices or future decisions. Therefore, the correct answer is A, as the sunk costs error is indeed associated with the mistaken belief that past investments can be recouped or justified.

Question 12

Mildred was persuaded by a fast-talking salesperson to carry an expensive brand of yarns in her retail needlecraft shop. Seldom does a customer buy this brand, but on those rare occasions Mildred tells herself she made the right decision. The yarns have been sitting on the shelf for several months and she has yet to profit from them. Mildred suffers from the ________.

Accepted Answer

Mildred is exhibiting confirmation bias by focusing on the rare occasions that support her decision to carry the expensive yarn, while ignoring the more frequent evidence that it was not a profitable choice.

Question 13

To make effective decisions in today's fast-moving world, managers need to ________.

Accepted Answer

Knowing when to call it quits is essential for effective decision-making in today's fast-moving world. The ability to quickly recognize when a strategy or initiative is not working and adjust accordingly is crucial for success. Building organizations that shun complexity, ignoring cultural differences, and relying solely on past successes may hinder a manager's ability to make effective decisions in a rapidly changing environment.

Question 14

Marty had arranged for a high-profile speaker to deliver the keynote address at her college's annual function. However, due to unforeseen circumstances, the speaker was forced to drop out at the last moment. Marty reacts to this news by saying, "I knew all along that this would happen." This is an example of the ________.

Accepted Answer

Marty's statement implies that she believed she had predicted the outcome, which is a characteristic of hindsight bias (also known as the "I-knew-it-all-along" effect). This bias refers to the tendency to believe, after an event has occurred, that one would have predicted or expected that outcome.

Question 15

When decision makers seek out information that reaffirms their past choices and discount information that contradicts past judgments, they are exhibiting the ________ bias.

Accepted Answer

The confirmation bias refers to the tendency of decision makers to selectively seek out and give more weight to information that supports their preexisting beliefs, while ignoring or discounting information that challenges those beliefs. This can lead to a lack of objectivity and potentially flawed decision making.

Question 16

It hasn't rained in several days; therefore it is unlikely to rain today. This is an example of the ________.

Accepted Answer

The answer of It hasn't rained in several days; therefore...

Question 17

Beth hired Tom, trained him, coached him, and expected he would be her eventual replacement when she moved up in the company. She noted each of his accomplishments with pride but wrote off as vicious gossip the comments from Tom's co-workers that he was making too many mistakes. Beth is experiencing the ________.

Accepted Answer

Beth is experiencing confirmation bias, which occurs when someone favors information that confirms their preexisting beliefs or hypotheses, ignoring or discounting evidence that contradicts those beliefs. In this case, Beth focuses on Tom's accomplishments, which confirm her belief in his potential, while dismissing negative feedback as gossip.

Question 18

An effective decision-making process ________.

Accepted Answer

An effective decision-making process should focus on matters of importance, ensuring that critical issues are given the necessary attention and consideration. Focusing on consistency more than logic can lead to rigidity and an inability to adapt to changing circumstances, while avoiding subjective and intuitive thinking can limit creativity and overlook important factors. Complexity can hinder the decision-making process, so reliability is more important than complexity. Therefore, option A is the best choice.

Question 19

"We can't stop now. We've already invested $100,000 in the project." This speaker is acting on the ________.

Accepted Answer

The speaker is referring to the sunk costs, which is the amount of money that has already been spent on a project and can't be recovered. They are using this as a justification to continue with the project, even if it may not be the best decision moving forward. This is known as the sunk costs error.

Question 20

The availability bias describes the actions of decision makers who try to create meaning out of random events.

Accepted Answer

The availability bias refers to the tendency of decision makers to rely on readily available information, rather than seeking out all relevant data, which may lead to biased and incomplete decisions.

Quiz 2: Decision Making