Question 1

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

Accepted Answer

C) Having a list of models means that the manager is beyond identifying decision criteria. She has identified a group of possible choices-in other words, she has developed a list of alternatives. Analysis of the alternatives will be the next step in the process, followed by actually selecting one particular alternative. The manager would have identified decision criteria earlier in the process.

Question 2

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

Accepted Answer

C) All of the choices listed are common decision-making errors and biases except "forest for the trees." Sunk costs refers to managers who fixate on past costs rather than future consequences. Randomness occurs when managers see patterns and trends that do not exist. Overconfidence bias occurs when managers overestimate their own strengths and skills.

Question 3

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

Accepted Answer

C) The ideal rational decision will feature a clear and specific goal, a problem that is clear and unambiguous, and value that is maximized. This ideal decision would also require that all, not just many, alternatives and consequences would be known.

Question 4

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

Accepted Answer

B) Maximizing value is a question of achieving goals. When a decision maker maximizes value, he or she makes the decision that is most likely to achieve his or her goal. Being clear and logical, efficient, or simple are worthy goals for a decision maker, but they do not define maximizing value so they are incorrect responses for this question.

Question 5

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

Accepted Answer

A) The first thing the manager needs to do is identify the problem. More specifically, she needs to determine whether she actually has a problem or not. If the computers her department now has are performing satisfactorily, she may decide that she doesn't have a problem and doesn't need to purchase new computers. The other choices-identifying criteria, developing alternatives, or implementing an alternative-all come later in the process, after the manager has determined what her problem is.

Question 6

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

Accepted Answer

D) A representation bias is a false parallel of current events to other events, something that is not occurring here. A self-serving bias, blaming the situation on outside influences, is also not relevant to this situation. Availability bias occurs when decision makers value only the most recent events that are relevant to the situation, also not occurring here. What is occurring is that the legislators are framing the problem in different ways. This framing results in them coming to very different conclusions about how to solve the problem.

Question 7

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

Accepted Answer

A) Models that managers use to make decisions include the rational model, the bounded rational model, and the intuitive model. The rational model focuses on being logical and objective. The bounded rational model assumes limitations on the rational model and makes "good enough" decisions. The intuitive model employs emotions and subconscious modes of thinking within a rational context. The other three choices are incorrect because they include categories that do not identify decision-making methods: irrational, unintuitive, and systematic.

Question 8

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

Accepted Answer

C) The scientist is "cherry picking" data that supports her position and ignoring conflicting data. She is guilty of confirmation bias, seeing only what confirms her preconceived notions. Hindsight would require her to look back on events and claim that they were predictable, something that is not relevant here. Neither is self-serving, blaming outcomes on outside factors rather than taking responsibility for your own errors. Finally, the anchoring effect describes an individual who fails to adjust to incoming information, again not something that the scientist is doing in this situation.

Question 9

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

Accepted Answer

B) The correct answer here must be an error or bias that deals with short- and long-term gain. Overconfidence is the tendency of a decision maker to assess his own skills in a more positive light than they deserve, so it has nothing to do with short-term gain. When a person organizes events based on faulty perceptions, he is guilty of selective perception bias, again not directly concerned with short-term gain. Representation bias involves drawing parallels to events that aren't really related, so it is not correct here. Only immediate gratification, which is the tendency to go for a "quick score," involves going for short-term rather than long-term gain, so it is the correct response here.

Question 10

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.

Accepted Answer

D) There are no set rules for weighting criteria. All weights can be the same, but in most cases they will be different. Similarly, there is no total amount that all weights should equal. The high score may or may not be assigned a 10, and in many cases two or more criteria can be assigned with the same weight. Only assigning the most important criterion a score and assigning weights against that standard offers helpful advice-measuring each criterion against a standard in most cases will result in a reliable representation of values.

Question 11

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

Accepted Answer

D) A heuristic is a rule of thumb that allows a decision maker to focus on a few key variables in the process. Heuristics can be useful, so they are not totally unreliable. Heuristics are simple, making a complicated and systematic method of decision making incorrect. Heuristics can be partly intuitive, but they can also be highly rational, making a purely intuitive method incorrect.

Question 12

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

Accepted Answer

B) The manager is assessing her decision to purchase new computers. Was it worth it? This is the final stage of the decision-making process, evaluation of decision effectiveness. Analyzing alternatives, selecting a single alternative, and implementing that single alternative all come earlier in the decision-making process.

Question 13

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

Accepted Answer

A) A buyer who is looking for performance would care how sturdy and light the frame was and how efficient the gears and brakes were. The warranty does not directly affect performance so it would be least likely to be a decision criterion for the bike buyer.

Question 14

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.

Accepted Answer

B) There is no way of knowing whether monitor A was really a better choice than B or if the manager made a calculation error. What is true is that the manager should have included "trust" as one of his criteria categories. If trust was an overriding factor, then the manager should have weighted it heavily so it tilted the score toward what his true feelings were. In essence, the manager made a mistake in selecting and weighting criteria.

Question 15

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

Accepted Answer

B) Managerial decisions for an organization must always take the organization's best interests into account. This is how decisions for organizations differ from those for individuals. As an individual, a manager looks out only for him- or herself. As a manager, the same person must put the interests of the organization first. Making money, or making highly rational or simple decisions, does not maximize value for an organization.

Question 16

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.

Accepted Answer

D) The one thing that a heuristic does not do is explore all alternatives for solving a problem. Instead, a heuristic looks at only a small part of the problem and uses key features to arrive at a decision and avoid a complete examination of the options. Heuristics often do successfully seem to make complicated, ambiguous situations easier to understand and deal with, so eliminating complexity and ambiguity are not correct answers. Without a doubt, heuristics save time, which eliminates "saving time" as the correct answer.

Question 17

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

Accepted Answer

D) A perfectly rational decision maker would always make a "good" decision based on sound reasoning, but he or she could still make the wrong choice in a given situation. A rational decision maker would face both easy and difficult problems. Subjectivity and impracticality are not characteristics of a rational decision maker. The important characteristics of a rational decision maker are that he or she is rational and logical, meaning that being objective and logical is the correct response.

Question 18

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

Accepted Answer

A) Though heuristics can be very useful in saving time and effort, they can also lead to mistakes, making "errors and biases" the correct response here. There is no evidence that using heuristics results in more imaginative decisions or decisions that solve problems more directly. Finally, since heuristics are known to lead to errors and biases, they clearly do not lead to better decisions, so "consistently better decisions" is incorrect.

Question 19

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

Accepted Answer

B) Of the four choices, only weight can be measured in an objective manner. Handling, craftsmanship, and style all require making subjective judgments about what the buyer likes and doesn't like. Style is largely a matter of taste. Handling and craftsmanship cannot be measured on a simple scale. So "weight" is the correct choice here.

Question 20

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

Accepted Answer

D) Criteria are chosen solely on the basis of the priorities of the buyer. If bike experts consider frame composition a key criterion for choosing a bike but the buyer does not consider it important, then it would be unlikely to be included as a criterion. Similarly, popularity of bike features or technical specifications might enter into the decision-making process, but only if the buyer thought they were important. In other words, the only factors that are important for selection of decision criteria for a bike buyer are the personal preferences of the buyer.

Quiz 5: Foundations of Decision Making

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?

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

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

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

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?

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) ________.

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

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 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?

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

What is a heuristic?

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?

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

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?

Maximizing value for an organization means making sure that ________.

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

It is assumed that a rational decision maker ________.

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

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

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