Testbank of fundamental of management 7e by robin ch 03

Fundamentals of Management, 7e (Robbins/DeCenzo/Coulter)
Chapter 3 Foundations of Decision Making
1) In decision making, a problem can be defined as a discrepancy between what exists and what
the problem solver desires to exist.
Answer: TRUE
Explanation: A problem is a difference between a desired state and an existing state. For
example, suppose a person is hungry—the existing state of not having food. The desired state is
to obtain food. So the problem is defined as the difference between the no-food state and the
food state.
Diff: 2
Page Ref: 58
Objective: 3.1
2) The second step in the decision-making process is identifying a problem.
Answer: FALSE
Explanation: The identification of a problem is the first step in the decision-making process.
Once you have identified a problem, you can decide how to solve it.
Diff: 1
Page Ref: 59
Objective: 3.1
3) A decision criterion defines factors that are relevant in a decision.
Answer: TRUE
Explanation: Decision criteria are comprised of factors that will affect a decision. If the decision
is between driving or riding a bike to work, criteria might include cost, weather, convenience,
ecological considerations, time, clothing, and so on.
Diff: 2
Page Ref: 59
Objective: 3.1
4) Managers identify a problem by comparing the current state of affairs to some standard.
Answer: TRUE
Explanation: The standard for comparison might be a goal that has been set, or comparison with
some historical standard or standard set by a competitor. For example, a manager might detect a

discrepancy between a goal of 100 units sold and the existing state of only 50 units sold. This
discrepancy constitutes a problem that must be solved.
Diff: 3
Page Ref: 59
Objective: 3.1
5) All criteria are equally important in the decision-making process.
Answer: FALSE
Explanation: Criteria have differing values, depending on their importance. The importance of
an individual criterion is indicated by how it is weighted. The greater the weight assigned to the
criterion, the greater its importance.
Diff: 2
Page Ref: 59
AACSB: Analytic Skills
Objective: 3.1

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6) Identifying the wrong problem is just as much a failure for a manager as identifying the right
problem and failing to solve it.
Answer: TRUE
Explanation: Problem identification is a critical part of problem solving and decision making.
Solving the wrong problem does nothing to further a manager's goals so it is no value.
Diff: 2
Page Ref: 59
AACSB: Analytic Skills
Objective: 3.1
7) The final step of the decision-making process is to implement the alternative that has been
selected.

Answer: FALSE
Explanation: Implementation of the best alternative is the second-to-last step in the process. The
final step of the process is to appraise the result of the decision to see if it solved the problem.
Diff: 1
Page Ref: 61
Objective: 3.1
8) A heuristic can simplify the decision-making process.
Answer: TRUE
Explanation: A heuristic is a rule of thumb that is used to simplify the decision-making process
by allowing the decision maker to focus on just a few variables, rather than all variables. When
used wisely, heuristics make decision making easier and simpler.
Diff: 1
Page Ref: 62
Objective: 3.1
9) Because heuristics simplify the decision-making process, they are unlikely to lead to errors.
Answer: FALSE
Explanation: By virtue of their simplicity, heuristics can lead to many different kinds of biases
and errors. Using heuristics lures decision makers into ignoring critical elements of the situation
and oversimplifying the problem.
Diff: 1
Page Ref: 62
AACSB: Analytic Skills
Objective: 3.1
10) Decision makers who "cherry-pick" information that matches what they already know are
guilty of confirmation bias.
Answer: TRUE
Explanation: Confirmation bias means that the decision maker has already made up his or her
mind and is seeking only the information that will confirm that position. Cherry-picking is a way
of preferentially selecting information that supports your position and ignoring all other
information.

Diff: 1
Page Ref: 62
AACSB: Analytic Skills
Objective: 3.1

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11) A basketball coach who takes a very good shooter out of a game because she missed her last
two shots has availability bias.
Answer: TRUE
Explanation: Availability bias is the tendency to over-accentuate recent history and discount
long-term patterns. This basketball coach is ignoring long-term patterns—the player is a good
shooter—in favor of very recent history—two missed shots—so he is displaying availability
bias.
Diff: 1
Page Ref: 63
AACSB: Analytic Skills
Objective: 3.1
12) A rational decision will never fail to provide the best and most successful solution to a
problem.
Answer: FALSE
Explanation: A rational decision is logical, 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.
Diff: 3
Page Ref: 64
AACSB: Analytic Skills
Objective: 3.2

13) Maximizing value means a decision will have the best possible outcome for the parties
involved.
Answer: TRUE
Explanation: Maximizing value is a matter of making a decision that results in the ideal, or best
possible solution. A baseball manager, for example, wants to make a decision that will not only
score runs, a favorable outcome, but win the game, the ideal or maximal outcome.
Diff: 2
Page Ref: 65
AACSB: Analytic Skills
Objective: 3.2
14) One assumption of bounded rationality is that managers can analyze all relevant information
about all alternatives for a situation.
Answer: FALSE
Explanation: The idea of bounded rationality says that decision makers can never analyze all
information for the alternatives involved. So decision makers need to put limits on how much
information they will analyze.
Diff: 2
Page Ref: 65
AACSB: Analytic Skills
Objective: 3.2

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15) A synonym for the word satisfice is maximize.
Answer: 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."
Diff: 2
Page Ref: 65
AACSB: Analytic Skills
Objective: 3.2
16) One assumption of bounded rationality is that managers usually make rational decisions.
Answer: 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.
Diff: 2
Page Ref: 66
AACSB: Analytic Skills
Objective: 3.2
17) Intuitive decision making is systematic, logical, and orderly.
Answer: FALSE
Explanation: Intuitive decisions may be perfectly sound, but they are not arrived at through a
systematic analysis of alternatives. Instead, intuitive decisions are quickly made and rely on
experience, unconscious reasoning, feelings, and hunches.
Diff: 2
Page Ref: 66
AACSB: Analytic Skills
Objective: 3.2
18) Intuitive decision making cannot be a part of the rational decision-making process.
Answer: FALSE
Explanation: Intuitive decisions are not arrived at in a deliberative, systematic manner, but they
can be objective and logical, so they are considered rational.
Diff: 2
Page Ref: 66

AACSB: Analytic Skills
Objective: 3.2
19) The expression "throwing good money after bad" is an example of an escalation of
commitment.
Answer: TRUE
Explanation: Throwing good money after bad typically denotes a situation in which money has
already been wasted on an unsuccessful venture—"bad money." Throwing more "good money"
into the situation simply because of the "bad money" already committed is a clear example of
escalation of commitment.
Diff: 2
Page Ref: 66
AACSB: Analytic Skills
Objective: 3.2

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20) Emotions should always be strictly ignored in a decision-making process.
Answer: FALSE
Explanation: Decisions that were accompanied by strong feelings were found to be more reliable
than those that did not have an emotional component, according to one study, especially in cases
in which decision makers acknowledged their feelings. So emotions should not be ignored during
the decision-making process.
Diff: 2
Page Ref: 67
AACSB: Analytic Skills
Objective: 3.2
21) Programmed decisions tend to be routine.
Answer: TRUE

Explanation: A programmed decision is a routine decision that works well in solving structured
problems that present no ambiguity or unknown elements. Programmed decisions can usually be
solved using a systematic procedure, rule, or policy.
Diff: 1
Page Ref: 68
AACSB: Analytic Skills
Objective: 3.3
22) A rule is simpler than a policy or a procedure to implement.
Answer: TRUE
Explanation: A rule is a simple statement that can be applied directly to a situation. For example,
a broker can easily follow a rule to sell a specific stock when it reaches a specific price point. A
procedure or policy may have an identical outcome, but a more complicated series of steps must
be taken to arrive at that outcome.
Diff: 2
Page Ref: 68-69
AACSB: Analytic Skills
Objective: 3.3
23) Implementing a procedure requires more judgment and interpretation than implementing a
policy.
Answer: FALSE
Explanation: A procedure is a series of steps that must be followed to arrive at a decision, each
of the steps being clear and straightforward. A policy provides guidelines rather than steps for the
decision maker to follow. Each guideline must be interpreted and evaluated for the situation at
hand. Therefore a policy requires much more judgment and interpretation than a procedure.
Diff: 2
Page Ref: 69
AACSB: Analytic Skills
Objective: 3.3
24) A highway speed limit is an example of a policy.
Answer: FALSE

Explanation: A highway speed limit is an example of a rule, not a policy. Policies require the
decision maker to exercise judgment and interpretation. Following a speed limit, on the other
hand, involves no interpretation. The driver simply must not exceed the posted speed.
Diff: 2
Page Ref: 69
Objective: 3.3

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25) Managerial decisions are likely to become more programmed as managers rise in an
organizational hierarchy.
Answer: FALSE
Explanation: Problems that managers face become more unique, ambiguous, and difficult as the
status of a manager rises, not more programmed. Top managers are paid more than lower-level
managers specifically because they are expected to make difficult decisions. More routine
decisions are made by lower-level managers.
Diff: 2
Page Ref: 70
Objective: 3.3
26) Most managerial decisions include an element of risk.
Answer: TRUE
Explanation: Few situations involve certainty, in which a manager knows all outcomes in a
situation and can choose between them. Instead, situations usually involve risk, in which the
manager must estimate the probability of different outcomes.
Diff: 1
Page Ref: 70
Objective: 3.3
27) Uncertainty involves a situation in which the probability of a certain outcome is known to be

small.
Answer: FALSE
Explanation: In an uncertain situation, the probabilities of specific outcomes are not known and
cannot be reasonably estimated. Therefore, the probability that any outcome is high or low
cannot be determined.
Diff: 3
Page Ref: 70
AACSB: Analytic Skills
Objective: 3.3
28) A manager is more confident of his assessment of a situation if it involves risk rather than
uncertainty.
Answer: TRUE
Explanation: With risk, a manager is able to estimate the likelihood of specific outcomes. With
uncertainty, not enough is known even to make estimates. So a manager would be more
confident of a position involving risk.
Diff: 3
Page Ref: 70
AACSB: Analytic Skills
Objective: 3.3
29) Group decisions tend to provide more complete information than individual decisions.
Answer: TRUE
Explanation: Because "two heads are better than one" groups tend to identify more alternatives
and consider more information before coming to a decision.
Diff: 1
Page Ref: 71
Objective: 3.4

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30) An advantage of group decisions is that they increase the perception of the legitimacy of the
solution.
Answer: TRUE
Explanation: When decisions that affect many people are made without their consent, they tend
to be less well accepted than group decisions in which all parties are consulted. A group decision
is perceived to be more legitimate because it was made in a more democratic manner.
Diff: 1
Page Ref: 71
AACSB: Communication
Objective: 3.4
31) A drawback of group decision making is groupthink.
Answer: FALSE
Explanation: When a group experiences groupthink, members do not freely express their
opinions for fear of standing out and having to assume responsibility for their actions.
Groupthink often results in bland, unimaginative decisions that fail because they are too timid.
Diff: 1
Page Ref: 72
AACSB: Communication
Objective: 3.4
32) Groups tend to be more efficient and less effective than individual decision making.
Answer: TRUE
Explanation: The reverse is usually true. Because achieving consensus within a group takes
time, group decision making often takes longer than individual decision making it less efficient.
However, groups are typically more thorough than individuals, so group decisions are often more
effective at achieving goals than decisions made by individuals.
Diff: 2
Page Ref: 73
Objective: 3.4
33) Two major advantages of electronic meetings are anonymity and honesty.

Answer: TRUE
Explanation: Electronic meetings allow participants to type in comments without needing to
identify themselves. This creates an atmosphere in which people feel more free to express their
true feelings.
Diff: 2
Page Ref: 74
AACSB: Technology
Objective: 3.4
34) 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.
Answer: TRUE
Explanation: High uncertainty avoidance makes managers avoid difficult decisions and be
overly agreeable and accommodating. High power distance allows high-status individuals to
dominate groups. Both of these attributes would contribute to groupthink, the tendency of groups
to avoid controversy and conform to conventional positions.
Diff: 2
Page Ref: 75
AACSB: Analytic Skills
Objective: 3.5

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35) Creative solutions to problems are valued because they are new and different from traditional
solutions.
Answer: FALSE
Explanation: Creative solutions are valued only if they solve problems in ways that are superior
to conventional solutions. Often, solving a problem in a creative way can give a company a
competitive edge on its competitors.

Diff: 1
Page Ref: 71
Objective: 3.5
36) Decision making begins with ________.
A) selecting alternatives
B) identifying decision criteria
C) identifying a problem
D) eliminating false alternatives
Answer: C
Explanation: C) The process of decision making begins with the identification of a problem.
Once the problem has been identified the decision maker goes through a series of steps to solve
the problem. Selecting alternatives is part of the decision-making process but it is a step that
comes much later, after criteria have been identified, weighed against one another, developed
into alternatives, and analyzed as alternatives. Eliminating false alternatives, is something that a
decision maker might do, but it is not a recognized part of the process.
Diff: 2
Page Ref: 58
Objective: 3.1
37) 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
Answer: A
Explanation: A) Though problems certainly can irritate, and merit attention, these characteristics
are not universal enough by themselves to define what a problem is in the decision-making
process. In this process, a problem is defined as a discrepancy, or difference between how things
are and how the decision maker wants things to be. A problem is not a difference between the
ideal and the practical, but rather just a situation in which things are less than satisfactory, and
the decision maker intends to take action to make them satisfactory.

Diff: 1
Page Ref: 58
Objective: 3.1

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38) 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
Answer: B
Explanation: B) The goal of the decision-making process is to solve the problem that has been
identified. The process assumes that there is a solution to the problem, so determining if there is
a solution to the problem is not correct. The process includes making a plan to solve the problem
and breaking the problem down into steps. However, ultimately the decision maker wants to
implement the best alternative to solve the problem, then evaluate this alternative to see if it
actually resulted in a successful solution.
Diff: 1
Page Ref: 58
AACSB: Analytic Skills
Objective: 3.1
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

Answer: D
Explanation: D) A manager compares what she has now to some standard or goal to identify a
problem. The standard or goal may represent some level of performance from the past, or it
could be an as yet unreached level that the manager thinks can be attained. Looking for unhappy
customers or using intuition to see when things don't look right may be ways to identify
problems but they are not general problem identification methods. Finally, comparing one set of
standards or goals to a second set is incorrect because a problem is always identified by
comparing an actual state to a standard or goal, not one set of standards or goals to another.
Diff: 1
Page Ref: 58
Objective: 3.1
40) 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
Answer: A
Explanation: A) Assigning number values to decision criteria may often be helpful in the
decision-making process, but they are not required for a successful outcome. Solving the
problem inefficiently may not be ideal, but it is not without value. Identifying the steps of the
process have little to do with the success of the process. That leaves failing to identify the correct
problem—it does no good to solve a problem if it is the wrong problem. Solving the wrong
problem has no benefit for the organization or its goals.
Diff: 2
Page Ref: 59
AACSB: Analytic Skills
Objective: 3.1
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41) 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 decisionmaking process is she going through?
A) identification of a problem
B) identification of decision criteria
C) development of alternatives
D) implementation of an alternative
Answer: A
Explanation: 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.
Diff: 2
Page Ref: 58-59
AACSB: Analytic Skills
Objective: 3.1
42) 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
Answer: C
Explanation: 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.
Diff: 2
Page Ref: 58-59
AACSB: Analytic Skills
Objective: 3.1

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43) 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 decisionmaking process is she carrying out?
A) analysis of alternatives
B) evaluation of decision effectiveness
C) selection of an alternative
D) implementation of an alternative
Answer: B
Explanation: 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.
Diff: 2
Page Ref: 58-62
AACSB: Analytic Skills
Objective: 3.1
44) 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
Answer: D
Explanation: 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.
Diff: 2
Page Ref: 59
AACSB: Analytic Skills
Objective: 3.1
45) 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
Answer: A
Explanation: 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.
Diff: 2
Page Ref: 59
AACSB: Analytic Skills
Objective: 3.1

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46) 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
Answer: B
Explanation: 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.
Diff: 2
Page Ref: 60
AACSB: Analytic Skills
Objective: 3.1
47) A manager chooses to ignore a rigorous decision-making process and select 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.
Answer: B
Explanation: 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.
Diff: 3

Page Ref: 60-61
AACSB: Analytic Skills
Objective: 3.1
48) 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 sum to 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.
Answer: D
Explanation: 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 sum
to. 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.
Diff: 3
Page Ref: 60
AACSB: Analytic Skills
Objective: 3.1
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49) 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
Answer: D

Explanation: 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 is
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.
Diff: 2
Page Ref: 62
Objective: 3.1
50) 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
Answer: A
Explanation: 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.
Diff: 2
Page Ref: 62
AACSB: Analytic Skills
Objective: 3.1
51) 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.
Answer: D

Explanation: 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 eliminated as correct answers. Without a doubt,
heuristics save time which eliminates "saving time" as the correct answer.
Diff: 2
Page Ref: 62
AACSB: Analytic Skills
Objective: 3.1

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52) 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
Answer: B
Explanation: B) The correct answer here must be an error or bias that deals with short- and longterm 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.
Diff: 2

Page Ref: 62-63
AACSB: Analytic Skills
Objective: 3.1
53) 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
Answer: C
Explanation: 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.
Diff: 2
Page Ref: 62
AACSB: Analytic Skills
Objective: 3.1

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54) 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
Answer: D
Explanation: 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.
Diff: 2
Page Ref: 63
AACSB: Analytic Skills
Objective: 3.1
55) 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
Answer: C
Explanation: C) All of the choices are listed as 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.
Diff: 2
Page Ref: 62-63
Objective: 3.1
56) The three main models that managers use to make decisions are ________.
A) rational, bounded rational, and intuitive
B) rational, irrational, bounded rational
C) intuitive, unintuitive, rational

D) bounded rational, intuitive, systematic
Answer: A
Explanation: 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 all incorrect because they include
categories that do not identify decision-making methods: irrational, unintuitive, and systematic.
Diff: 1
Page Ref: 64-66
Objective: 3.2

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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
Answer: D
Explanation: 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.
Diff: 2
Page Ref: 64

AACSB: Analytic Skills
Objective: 3.2
58) 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
Answer: B
Explanation: 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.
Diff: 2
Page Ref: 64
AACSB: Analytic Skills
Objective: 3.2
59) 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
Answer: B
Explanation: 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.
Diff: 2
Page Ref: 64
AACSB: Analytic Skills

Objective: 3.2

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60) Which of the following is NOT assumed in a rational decision?
A) a clear and specific goal
B) a clear and unambiguous problem
C) many alternatives and consequences are known
D) value is maximized
Answer: C
Explanation: C) The ideal rational decision will feature a clear and specific goal, a problem that
is clear and unambiguous, and value is maximized. This ideal decision would also require that
all, not just many alternatives and consequences, would be known.
Diff: 2
Page Ref: 64
AACSB: Analytic Skills
Objective: 3.2
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
Answer: C
Explanation: C) Greed and short-sightedness may affect the decisions of some, but clearly not
all managers. Most managers are rational in that they are reasonable, logical, and have the best
interests of their organization in mind. What limits the decisions of managers most of the time is
not having too much information but having too little, and not having the time or resources to be
able to analyze all of the information that is relevant to all of the alternatives in a given situation.

Diff: 2
Page Ref: 65
AACSB: Analytic Skills
Objective: 3.2
62) Which term best characterizes a decision that has bounded rationality?
A) virtually perfect
B) rigorous and comprehensive
C) not good enough
D) good enough
Answer: D
Explanation: D) Rather than thought to be perfect or rigorous and thorough, a bounded
rationality decision is considered to be just "good enough."
Diff: 2
Page Ref: 65
AACSB: Analytic Skills
Objective: 3.2

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63) 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
Answer: B
Explanation: B) Systems that use sequential question-asking systems to aid decision makers
such as doctors to diagnose illnesses are called expert systems. Text reading software is used

simply to decipher text. Support software is generic software for any application. Group systems
are not used for decision making.
Diff: 2
Page Ref: 65
AACSB: Technology
Objective: 3.2
64) Expert systems are primarily used to help what kinds of decision makers?
A) lower-level managers
B) top managers
C) senior managers
D) experts
Answer: A
Explanation: A) Expert systems are primarily used by non-experts to make high quality
decisions. These non-experts are typically lower-level managers. Top managers, senior
managers, or experts may all use expert systems from time to time, but the systems are designed
specifically to guide non-experts in making useful decisions.
Diff: 2
Page Ref: 65
AACSB: Technology
Objective: 3.2
65) 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
Answer: C
Explanation: C) Humans typically can only process two or three variables at once when problem
solving. Neural networks can handle hundreds of variables, outdoing human performance.
Analyzing symbols is incorrect because both computers and humans can analyze symbols. As
yet, no computers are proficient at extracting important information by reading facial

expressions.
Diff: 2
Page Ref: 65
AACSB: Technology
Objective: 3.2

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66) 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
Answer: D
Explanation: D) Neural networks are special because they can learn from experience. Situations
are shown to the network and the network learns to recognize keys to these situations so that it
can recognize them and employ what was learned to make decisions in the future. Drawing
conclusions, asking questions, or performing complicated calculations are all normal functions
for a software program and not special to neural networks.
Diff: 2
Page Ref: 65
AACSB: Technology
Objective: 3.2
67) Neural networks outperfom expert systems in uncovering ________.
A) credit card fraud
B) false positives for pregnancy
C) potential credit card customers
D) credit problems in bank mortgages

Answer: A
Explanation: A) Expert systems were flawed in dealing with credit card fraud in that they kept
giving false positives—finding fraud where it didn't exist. Neural networks proved to be much
better at discovering credit card fraud without many false positives. Neural networks were not
used for pregnancy tests, finding new credit card customers, or finding credit problems in
mortgages.
Diff: 2
Page Ref: 65
AACSB: Technology
Objective: 3.2
68) 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
Answer: C
Explanation: C) Rather than study how people spend money, Simon studied how people made
decisions. He found that people were limited in their ability to use logic and were not perfectly
rational in their decision making. Simon did not investigate how people avoid decisions.
Diff: 2
Page Ref: 65
Objective: 3.2

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69) 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
Answer: C
Explanation: C) When you satisfice you are accepting a "good enough" or less than perfect
solution to a problem. Not sufficient is incorrect because satisficing is often sufficient to solve a
problem. Very satisfying is wrong because though satisfice sounds like satisfy, it has nothing to
with that word. Finally, requires a perfect solution is incorrect because the term does not require
the perfect solution, but rather a compromise on perfection.
Diff: 2
Page Ref: 66
Objective: 3.2
70) 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
Answer: D
Explanation: D) Simon found that people were limited in fully understanding their current
situation. Without understanding the present, they also had trouble planning for the future.
Though people may have trouble being honest, dealing with difficult situations, and thinking
independently, none of these items were involved in Simon's work.
Diff: 2
Page Ref: 66
Objective: 3.2
71) 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

Answer: A
Explanation: A) Satisficing is accepting a "good enough" position, rather than maximizing a
decision. When a decision is maximized, goals are reached and the best possible solution is
found. Satisficing does not entail failing to: understand one's position, accept the truth, or make a
decision to begin with. Instead, satisficing involves going with a less than thorough examination
of all outcomes to find a "good enough" solution.
Diff: 2
Page Ref: 66
Objective: 3.2

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72) 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
Answer: A
Explanation: A) In some cases, people feel committed to a decision even when evidence shows
that it was faulty. This tendency of failing to let go of a decision is called escalation of
commitment. Escalation of rationality is incorrect because it does not refer to commitment.
Sticking with a poor decision is not satisficing so that choice is incorrect. Error enhancement
may describe this situation somewhat, but it is not a recognized term.
Diff: 2
Page Ref: 66
Objective: 3.2
73) 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
Answer: B
Explanation: B) Escalation of commitment can occur when people cling to an earlier decision.
Rather than admit it was wrong and that they should start over, they stick with their original
decision. Failing to make a decision in the first place, accepting current conditions, or
understanding that conditions have changed are not situations in which escalation of commitment
occurs.
Diff: 2
Page Ref: 66
Objective: 3.2
74) Which model of decision making takes advantage of unconscious reasoning?
A) rational
B) non-rational
C) intuitive
D) factual
Answer: C
Explanation: C) Intuitive decision making uses feelings, memories, experiences, and
unconscious reasoning to arrive at decisions. Unlike strictly rational decision making, intuitive
decision making is not a systematic approach. Intuitive decision making is rational to a degree,
making non-rational an incorrect choice. Factual is not a correct choice because it is not
recognized as a decision making model.
Diff: 2
Page Ref: 66
AACSB: Analytic Skills
Objective: 3.2

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75) 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
Answer: D
Explanation: D) Intuitive decision making is somewhat reliable, but definitely not totally
reliable, eliminating that choice. Intuitive decision making is not at all thorough. In fact, it is
often employed as a short-cut in decision making. Since the process is never spelled out on paper
in terms of numbers and values, intuitive decision making is almost never quantified. Intuitive
reasoning is fast, often because decision makers are using years of experience to make a single
judgment.
Diff: 2
Page Ref: 66
AACSB: Analytic Skills
Objective: 3.2
76) 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
Answer: D
Explanation: D) Studies show that intuitive decision making is used more frequently than formal
analysis, meaning that managers use it more than half of the time. No managers claim to use the
method all or almost all of the time. Almost never can be eliminated because managers say they
use intuitive decision making frequently.
Diff: 2

Page Ref: 66
AACSB: Analytic Skills
Objective: 3.2
77) 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
Answer: C
Explanation: C) Intuitive decision making does not conflict with a rational mode of thinking.
Instead, intuitive decision making uses experience and feelings to provide shortcuts to rational
decision making. For these reasons, it is clear that both formal rationality and bounded rationality
can have intuitive elements.
Diff: 2
Page Ref: 67
AACSB: Analytic Skills
Objective: 3.2

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Copyright © 2011 Pearson Education, Inc


78) 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.
Answer: B
Explanation: B) Intuition can give people insight into questions that involve ethics and values,

past experience, or knowledge and training. What intuition cannot provide is any kind of formal
or mathematical analysis, so providing a formal analysis method is the correct choice here.
Diff: 2
Page Ref: 67
AACSB: Analytic Skills
Objective: 3.2
79) 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
Answer: B
Explanation: B) Studies show that emotions and feelings do affect decision making in a positive
way, improving performance. That said, emotions and feelings do not replace facts and logic in
decision making.
Diff: 2
Page Ref: 67
AACSB: Analytic Skills
Objective: 3.2
80) Structured problems are ________.
A) ambiguous
B) undefined and vague
C) clear and straightforward
D) incomplete
Answer: C
Explanation: C) A structured problem involves a clear, unambiguous, well-defined situation in
which all information is provided. The essence of a structured problem is that it is
straightforward and complete.
Diff: 2
Page Ref: 68

AACSB: Analytic Skills
Objective: 3.3

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81) Unstructured problems are ________.
A) perfectly rational
B) clear and straightforward
C) situations in which all options are known
D) situations in which all options are not known
Answer: D
Explanation: D) The essence of an unstructured problem is that information is missing. All
alternatives are not known. The problem solver must analyze the situation based on assumptions
that may or may not be true. This means that situations in which all options are not known is the
correct answer. The situation is not perfectly rational or straightforward. Information in an
unstructured problem is incomplete, so all options are not known.
Diff: 2
Page Ref: 68
AACSB: Analytic Skills
Objective: 3.3
82) Which of the following is an example of a structured problem?
A) designing a new MP3 player
B) hiring a lawyer
C) deciding shipping options for a vacuum cleaner
D) drafting a quarterback for a pro football team
Answer: C
Explanation: C) A structured problem should be straightforward and clear-cut. Of the four
choices, only "determining shipping options" requires a simple analysis of choices and priorities.

The other optionsdesigning a new product, hiring a person to represent you in the legal system,
and choosing a football player to lead your teamall are much less defined and more open
ambiguity than the correct choice; in other words they are unstructured problems.
Diff: 2
Page Ref: 68
AACSB: Analytic Skills
Objective: 3.3
83) Which of the following is an example of an unstructured problem?
A) finding the list price of different copy machines
B) choosing the best wardrobe for an executive
C) comparing gas mileage for different car models
D) measuring pollution levels in a power plant
Answer: B
Explanation: B) An unstructured problem requires judgment and discrimination among options
in a situation in which not all information is available. Only "choosing the best wardrobe for an
executive" fits this description, as choosing a wardrobe is a subjective act that can be
accomplished in many different ways. The other choicesfinding prices, comparing mileage, or
measuring pollutionare straightforward and do not include this ambiguous, subjective element,
so they are incorrect responses.
Diff: 2
Page Ref: 68
AACSB: Analytic Skills
Objective: 3.3

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Copyright © 2011 Pearson Education, Inc


84) Structured problems typically have ________ while unstructured problems typically have
________.

A) only one solution; many solutions
B) many solutions; one solution
C) many solutions; fewer solutions
D) two solutions; three solutions
Answer: A
Explanation: A) Structured problems, being straightforward, typically have one solution while
unstructured problems, being more ambiguous, can have many solutions. Two solutions and
three solutions stands out here as plausible but it is clearly incorrect since there is no way to
quantify the number of solutions to problems in such a definite way.
Diff: 2
Page Ref: 68
AACSB: Analytic Skills
Objective: 3.3
85) Programmed decisions work well for solving ________.
A) structured problems
B) unstructured problems
C) both structured and unstructured problems
D) poorly defined problems
Answer: A
Explanation: A) Programmed decisions are straightforward, routinized ways of making
decisions so they are best at solving structured problems, which themselves are routine and
straightforward. The remaining choice gets eliminated because poorly defined problems fall into
the "unstructured" category and would not be served with a programmed decision-making
process.
Diff: 2
Page Ref: 68
AACSB: Analytic Skills
Objective: 3.3
86) Programmed decisions draw heavily on which of the following?
A) mistakes made in the past

B) past solutions that were successful
C) past solutions that were unsuccessful
D) innovative new solutions
Answer: B
Explanation: B) Though programmed decisions draw on the past, they do not focus on mistakes
but rather emulate prior solutions that worked and were successful. Innovative new solutions is
incorrect because programmed decisions are not at all innovative but instead rely on tried and
true methods of problem solving.
Diff: 2
Page Ref: 68
AACSB: Analytic Skills
Objective: 3.3

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