Question 1

While negotiating salary with your prospective employer, if you suggest an initial target salary of $55,000, your employer will consider $50,000 to $60,000 a reasonable range for negotiation, but if you mention $55,650, your employer is more likely to consider $55,000 to $56,000 the range of likely values for negotiation. In this example your employer is exhibiting the ________ bias.
A) availability
B) anchoring
C) hindsight
D) confirmation
E) impact

Accepted Answer

B) The anchoring bias is a tendency to fixate on initial information and fail to adequately adjust for subsequent information. When a prospective employer asks how much you made in your prior job, your answer typically anchors the employer's offer.

Question 2

Tom knows that the title insurance company made a mistake on his property title. Because of their mistake, his neighbor now has access to an easement road through the 25 acres located at the back of his property. He can't use the acreage for pasture, because his neighbor insists that the gates remain open. The title company has offered a $40,000 settlement. Tom has decided to take the settlement rather than possibly lose in court if he were to sue the title company for more money. Tom's decision is based on ________.
A) hindsight bias
B) availability bias
C) risk aversion
D) randomness error
E) escalation of commitment

Accepted Answer

C) Risk aversion is the tendency to prefer a sure gain of a moderate amount over a riskier outcome, even if the riskier outcome might have a higher expected payoff. Tom does not want to risk losing the $40,000 for a possible, but uncertain, higher payoff.

Question 3

Which of the following statements is true regarding utilitarianism?
A) It protects the interests of the underrepresented and less powerful.
B) It reduces productivity and efficiency.
C) It promotes decision making that is consistent with fundamental liberties and privileges, as set forth in documents such as the Bill of Rights.
D) The utilitarianism view dominates business decision making.
E) It imposes and enforces rules fairly and impartially.

Accepted Answer

D) A focus on utilitarianism promotes efficiency and productivity, but it can sideline the rights of some individuals, particularly those with minority representation. This view dominates business decision making as decision makers, particularly in for-profit organizations, feel comfortable with utilitarianism.

Question 4

________ is a highly complex and highly developed form of reasoning that is based on years of experience and learning.
A) Contrast effect
B) Halo effect
C) Intuition
D) Selective perception
E) Emotional intelligence

Accepted Answer

C) Intuition is a highly complex and highly developed form of reasoning that is based on years of experience and learning. Intuitive decision making is an unconscious process created from distilled experience.

Question 5

The ________ bias is typically associated with negotiation.
A) confirmation
B) distinction
C) anchoring
D) hindsight
E) availability

Accepted Answer

C) The anchoring bias is a tendency to fixate on initial information and fail to adequately adjust for subsequent information. Anchors are widely used by people in professions in which persuasion skills are important-such as advertising, management, politics, real estate, and law. Anytime a negotiation takes place, so does anchoring.

Question 6

For many people, a 50-50 flip of a coin for $100 might not be worth as much as a sure promise of $50, even though the gamble is mathematically worth twice as much as the sure thing. This is an example of ________.
A) selective perception
B) self-serving bias
C) risk aversion
D) availability bias
E) confirmation bias

Accepted Answer

C) Risk aversion represents a tendency to prefer a sure thing over a risky outcome. Thus preferring a sure promise of $50 represents the tendency to prefer a sure thing over a risky outcome.

Question 7

You are part of a group, making a decision about whether it is appropriate to discontinue research on a new drug. This new drug would save lives, but it is uncertain whether you can develop it within a reasonable time frame and at a reasonable cost. Your firm has already spent a small fortune on this drug. You have gathered so much information in preparation to making the decision that you are unable to sort the good information from the superfluous data. You just feel that this project has merit.
-What form of decision making are you using if you decide to continue the project because you feel that the project has merit?
A) optimization
B) intuitive
C) rational
D) satisficing
E) bounded rationality

Accepted Answer

B) Intuitive decision making is an unconscious process created from distilled experience. Its defining qualities are that it occurs outside conscious thought; it relies on holistic associations, or links between disparate pieces of information. In the example, the speaker just "feels" that the project is good, relying on intuition.

Question 8

You are the manager of a development group in a large computer software company. You have decided that it is important for your group to understand the many ways that ethical decisions can be made and you are designing a training program on the subject of ethics.
-If you wish to emphasize the importance of making decisions consistent with fundamental liberties and privileges, the focus of your teaching will be on ________.
A) utilitarianism
B) justice
C) rights
D) privilege
E) service

Accepted Answer

C) Another ethical criterion is to make decisions consistent with fundamental liberties and privileges, as set forth in documents such as the Bill of Rights. An emphasis on rights in decision making means respecting and protecting the basic rights of individuals, such as the right to privacy, free speech, and due process.

Question 9

Which of the following types of biases in decision making represents the tendency of decision makers to prefer a sure thing?
A) hindsight bias
B) bounded rationality
C) escalation of commitment
D) selective perception
E) risk aversion

Accepted Answer

E) Risk aversion is the tendency to prefer a sure gain of a moderate amount over a riskier outcome, even if the riskier outcome might have a higher expected payoff.

Question 10

Which of the following statements is true regarding the hindsight bias?
A) It indicates a tendency to fixate on initial information and fail to adequately adjust for subsequent information.
B) It indicates that we seek out information that reaffirms our past choices, and we discount information that contradicts them.
C) It indicates our tendency to base judgments on information readily available.
D) It indicates our tendency to believe falsely, after the outcome is known, that we would have accurately predicted it.
E) It indicates our tendency to draw a general impression about an individual on the basis of a single characteristic, such as intelligence.

Accepted Answer

D) The hindsight bias is the tendency to believe falsely, after the outcome is known, that we'd have accurately predicted it.

Question 11

In the ethical yardstick of ________, decisions are made solely on the basis of their outcomes, ideally to provide the greatest good for the greatest number.
A) utilitarianism
B) self-serving bias
C) bounded rationality
D) selective perception
E) anchoring bias

Accepted Answer

A) The first ethical yardstick is utilitarianism, in which decisions are made to provide the greatest good for the greatest number. Decisions are made solely on the basis of their outcomes.

Question 12

________ refers to staying with a decision even when there is clear evidence it's wrong.
A) Escalation of commitment
B) Hindsight bias
C) Satisficing
D) Selective perception
E) Availability bias

Accepted Answer

A) Escalation of commitment refers to staying with a decision even when there is clear evidence it's wrong.

Question 13

The ________ bias can explain why managers doing performance appraisals give more weight to recent employee behaviors than to behaviors of 6 or 9 months earlier.
A) self-serving
B) availability
C) distinction
D) confirmation
E) hindsight

Accepted Answer

B) The availability bias can explain why managers doing performance appraisals give more weight to recent employee behaviors than to behaviors of 6 or 9 months earlier.

Question 14

You are part of a group, making a decision about whether it is appropriate to discontinue research on a new drug. This new drug would save lives, but it is uncertain whether you can develop it within a reasonable time frame and at a reasonable cost. Your firm has already spent a small fortune on this drug. You have gathered so much information in preparation to making the decision that you are unable to sort the good information from the superfluous data. You just feel that this project has merit.
-Which of the following is an example of a shortcut used in judging others?
A) hindsight bias
B) confirmation bias
C) stereotyping
D) randomness error
E) availability bias

Accepted Answer

C) When we judge someone on the basis of our perception of the group to which he or she belongs, we are using the shortcut called stereotyping. Hindsight bias, confirmation bias, availability bias, and randomness error are types of biases that affect decision making.

Question 15

Decision makers construct simplified models that extract the essential features from problems without capturing all their complexity. That is, they operate within the confines of ________.
A) optimal decision making
B) intuitive decision making
C) bounded rationality
D) rationality
E) common sense

Accepted Answer

C) The limited information-processing capability of human beings makes it impossible to assimilate and understand all the information necessary to optimize. So most people respond to a complex problem by reducing it to a level at which they can readily understand it. This simplified level is called bounded rationality.

Question 16

"A third criterion is to impose and enforce rules fairly and impartially to ensure justice or an equitable distribution of benefits and costs." Which of the following statements is true regarding this criterion?
A) Union members typically oppose this view.
B) It justifies paying people based on their performance.
C) It promotes risk taking and innovation.
D) It increases productivity.
E) It protects the interests of the underrepresented and less powerful.

Accepted Answer

E) A third criterion is to impose and enforce rules fairly and impartially to ensure justice or an equitable distribution of benefits and costs. Union members typically favor this view. It justifies paying people the same wage for a given job regardless of performance. A focus on justice protects the interests of the underrepresented and less powerful, but it can encourage a sense of entitlement that reduces risk taking, innovation, and productivity.

Question 17

Which of the following statements is true regarding the rational decision-making model?
A) The rational decision-making model takes into consideration the limited information-processing capability of individuals.
B) Rational decision-making models involve constructing simplified models that extract the essential features from problems without capturing all their complexity.
C) The rational decision-making model involves satisficing; seek solutions that are satisfactory and sufficient.
D) The rational decision-making model assumes that an individual is able to identify all the relevant options in an unbiased manner.
E) The rational decision-making process is an unconscious one created from distilled experience.

Accepted Answer

D) The rational decision-making model relies on a number of assumptions, including that the decision maker has complete information, is able to identify all the relevant options in an unbiased manner, and chooses the option with the highest utility. Most decisions in the real world don't follow the rational model. People are usually content to find an acceptable or reasonable solution to a problem rather than an optimal one. This is known as satisficing.

Question 18

We tend to accept at face value information that is consistent with our preconceived views, while we are critical and skeptical of information that challenges these views. This represents the ________ bias.
A) distinction
B) impact
C) hindsight
D) confirmation
E) self-serving

Accepted Answer

D) The confirmation bias represents a specific case of selective perception: we seek out information that reaffirms our past choices, and we discount information that contradicts them. We also tend to accept at face value information that confirms our preconceived views, while we are critical and skeptical of information that challenges these views.

Question 19

The three criteria for making ethical decisions are ________.
A) utilitarianism, creativity, and rights
B) historical precedents, rights, and utilitarianism
C) rewards, regulations, and time orientation
D) utilitarianism, rights, and justice
E) historical precedents, reward, and justice

Accepted Answer

D) There are three ways to frame decisions ethically. The first ethical yardstick is utilitarianism, in which decisions are made solely on the basis of their outcomes, ideally to provide the greatest good for the greatest number. Another ethical criterion is to make decisions consistent with fundamental rights. A third criterion is to impose and enforce rules fairly and impartially to ensure justice or an equitable distribution of benefits and costs.

Question 20

In a study conducted by Amos Tversky and Daniel Kahneman, the two showed that when asked to guess the percentage of African nations which are members of the United Nations, people who were first asked "Was it more or less than 10%?" guessed lower values (25% on average) than those who had been asked if it was more or less than 65% (45% on average). This example best represents the ________
A) anchoring bias
B) contrast effect
C) confirmation bias
D) availability bias
E) hindsight bias

Accepted Answer

A) The anchoring bias is a tendency to fixate on initial information and fail to adequately adjust for subsequent information. Anytime a negotiation takes place, so does anchoring. As soon as someone states a number, it compromises your ability to ignore that number.

Quiz 6: Perception and Individual Decision Making

Which of the following statements is true regarding utilitarianism?

________ is a highly complex and highly developed form of reasoning that is based on years of experience and learning.

The ________ bias is typically associated with negotiation.

For many people, a 50-50 flip of a coin for $100 might not be worth as much as a sure promise of $50, even though the gamble is mathematically worth twice as much as the sure thing. This is an example of ________.

Which of the following types of biases in decision making represents the tendency of decision makers to prefer a sure thing?

Which of the following statements is true regarding the hindsight bias?

In the ethical yardstick of ________, decisions are made solely on the basis of their outcomes, ideally to provide the greatest good for the greatest number.

________ refers to staying with a decision even when there is clear evidence it's wrong.

The ________ bias can explain why managers doing performance appraisals give more weight to recent employee behaviors than to behaviors of 6 or 9 months earlier.

Decision makers construct simplified models that extract the essential features from problems without capturing all their complexity. That is, they operate within the confines of ________.

"A third criterion is to impose and enforce rules fairly and impartially to ensure justice or an equitable distribution of benefits and costs." Which of the following statements is true regarding this criterion?

Which of the following statements is true regarding the rational decision-making model?

We tend to accept at face value information that is consistent with our preconceived views, while we are critical and skeptical of information that challenges these views. This represents the ________ bias.

The three criteria for making ethical decisions are ________.