You are on page 1of 34

Management, 11e (Robbins/Coulter)

Chapter 7 Managers as Decision Makers

1) The decision-making process begins by identifying decision criteria.


Answer: FALSE
Page Ref: 179
Topic: The Decision-Making Process
Objective: 1
Difficulty: Easy
Classification: Conceptual

2) A decision criterion defines what is important or relevant to resolving a problem.


Answer: TRUE
Page Ref: 180
Topic: The Decision-Making Process
Objective: 1
Difficulty: Easy
Classification: Conceptual

3) In the decision-making process, after allocating weights to the decision criteria, the decision
maker lists viable alternatives that could resolve the problem.
Answer: TRUE
Page Ref: 181
Topic: The Decision-Making Process
Objective: 1
Difficulty: Easy
Classification: Conceptual

4) Once the alternatives to solving a problem have been identified, the next step in the decision-
making process is selecting one of these alternatives.
Answer: FALSE
Page Ref: 181
Topic: The Decision-Making Process
Objective: 1
Difficulty: Easy
Classification: Conceptual

5) Implementing an alternative refers to the process of choosing the best alternative.


Answer: FALSE
Page Ref: 182
Topic: The Decision-Making Process
Objective: 1
Difficulty: Easy
Classification: Conceptual

1
Copyright 2012 Pearson Education, Inc. Publishing as Prentice Hall
6) Decision making is a part of the planning, organizing, leading, and controlling functions and
thus, the essence of management.
Answer: TRUE
Page Ref: 182
Topic: Decision-Making Styles
Objective: 2
Difficulty: Easy
Classification: Conceptual

7) One assumption of rational decision making is that the decision maker is not aware of all
possible alternatives and consequences.
Answer: FALSE
Page Ref: 183
Topic: Decision-Making Styles
Objective: 2
Difficulty: Easy
Classification: Conceptual

8) According to the concept of bounded rationality, managers make decisions rationally, but are
limited by their ability to process information.
Answer: TRUE
Page Ref: 183
Topic: Decision-Making Styles
Objective: 2
Difficulty: Easy
Classification: Conceptual

9) The phenomenon of escalation of commitment refers to an increased commitment to a


previous decision despite evidence that it may have been wrong.
Answer: TRUE
Page Ref: 184
Topic: Decision-Making Styles
Objective: 2
Difficulty: Easy
Classification: Conceptual

10) Intuitive decision making complements rational decision making but not bounded rational
decision making.
Answer: FALSE
Page Ref: 185
Topic: Decision-Making Styles
Objective: 2
Difficulty: Easy
Classification: Conceptual

2
Copyright 2012 Pearson Education, Inc. Publishing as Prentice Hall
11) A programmed decision is a repetitive decision that can be handled by a routine approach.
Answer: TRUE
Page Ref: 186
Topic: Types of Decisions and Decision-Making Conditions
Objective: 3
Difficulty: Easy
Classification: Conceptual

12) Rules and policies are the same.


Answer: FALSE
Page Ref: 186
Topic: Types of Decisions and Decision-Making Conditions
Objective: 3
Difficulty: Easy
Classification: Conceptual

13) A policy is an explicit statement that tells a manager what can or cannot be done.
Answer: FALSE
Page Ref: 186
Topic: Types of Decisions and Decision-Making Conditions
Objective: 3
Difficulty: Easy
Classification: Conceptual

14) Nonprogrammed decision making relies on procedures, rules, and policies.


Answer: FALSE
Page Ref: 186
Topic: Types of Decisions and Decision-Making Conditions
Objective: 3
Difficulty: Easy
Classification: Conceptual

15) Risk is the condition in which a decision maker is able to estimate the likelihood of certain
outcomes.
Answer: TRUE
Page Ref: 187
Topic: Types of Decisions and Decision-Making Conditions
Objective: 3
Difficulty: Easy
Classification: Conceptual

3
Copyright 2012 Pearson Education, Inc. Publishing as Prentice Hall
16) 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.
Answer: TRUE
Page Ref: 191-192
Topic: Decision-Making Styles
Objective: 4
Difficulty: Easy
Classification: Conceptual

17) The availability bias describes the actions of decision makers who try to create meaning out
of random events.
Answer: FALSE
Page Ref: 191
Topic: Decision-Making Styles
Objective: 4
Difficulty: Easy
Classification: Conceptual

18) The sunk costs error occurs when decision makers forget that current choices cannot correct
the past.
Answer: TRUE
Page Ref: 191
Topic: Decision-Making Styles
Objective: 4
Difficulty: Easy
Classification: Conceptual

19) Managers need to understand cultural differences to make effective decisions in today's fast-
moving world.
Answer: TRUE
Page Ref: 193
Topic: Effective Decision Making in Today's World
Objective: 5
Difficulty: Easy
Classification: Conceptual

20) Highly reliable organizations (HROs) are easily tricked by their success.
Answer: FALSE
Page Ref: 193
Topic: Effective Decision Making in Today's World
Objective: 5
Difficulty: Easy
Classification: Conceptual

4
Copyright 2012 Pearson Education, Inc. Publishing as Prentice Hall
21) A series of eight steps that begins with identifying a problem and concludes with evaluating a
decision's effectiveness is known as ________.
A) the decision-making process
B) decision support theory
C) a decision-tree analysis
D) a decision information system
Answer: A
Page Ref: 179
Topic: The Decision-Making Process
Objective: 1
Difficulty: Easy
Classification: Conceptual

22) A(n) ________ is the existence of a discrepancy between an existing and a desired state of
affairs.
A) hazard
B) risk
C) uncertainty
D) problem
Answer: D
Page Ref: 179
Topic: The Decision-Making Process
Objective: 1
Difficulty: Easy
Classification: Conceptual

23) Which of the following statements is true concerning problem identification?


A) Problems are generally obvious.
B) A symptom and a problem are one and the same.
C) Generally, what is a problem for one manager is a problem for all other managers.
D) Effectively identifying problems is not easy.
Answer: D
Page Ref: 180
Topic: The Decision-Making Process
Objective: 1
Difficulty: Moderate
Classification: Conceptual

5
Copyright 2012 Pearson Education, Inc. Publishing as Prentice Hall
24) After identifying a problem, the next step in the decision-making process is ________.
A) identifying decision criteria
B) allocating weights to decision criteria
C) analyzing alternatives
D) developing alternatives
Answer: A
Page Ref: 180
Topic: The Decision-Making Process
Objective: 1
Difficulty: Easy
Classification: Conceptual

25) To determine the ________, a manager must determine what is relevant or important to
resolving a problem.
A) bounded rationality of a decision
B) escalation of commitment
C) weight of the decision criteria
D) decision criteria
Answer: D
Page Ref: 180
Topic: The Decision-Making Process
Objective: 1
Difficulty: Easy
Classification: Conceptual

26) Amanda, a single parent, is looking for a new job. Considering that she has two school-going
children, she is particularly keen on finding an employer who can provide her with alternative
work arrangements such as flexible work hours and telecommuting. In terms of the decision-
making process, these represent Amanda's ________.
A) decision criteria
B) problems
C) alternatives
D) heuristics
Answer: A
Page Ref: 180
AACSB: Analytic Skills
Objective: 1
Difficulty: Moderate
Classification: Application

6
Copyright 2012 Pearson Education, Inc. Publishing as Prentice Hall
27) Max is planning on going away to college next year and is currently trying to figure out
which colleges he should apply to. He would like to major in English Literature at an accredited
liberal arts college, but is also looking for a university that offers financial aid. In terms of the
decision-making process, these represent Max's ________.
A) problems
B) alternatives
C) decision criteria
D) heuristics
Answer: C
Page Ref: 180
AACSB: Analytic Skills
Objective: 1
Difficulty: Moderate
Classification: Application

28) After identifying the decision criteria that are important or relevant to resolving a problem,
the next step in the decision-making process is ________.
A) allocating weights to the criteria
B) analyzing the alternatives to solving the problem
C) reducing the number of criteria through the process of elimination
D) implementing the alternative
Answer: A
Page Ref: 180
Topic: The Decision-Making Process
Objective: 1
Difficulty: Easy
Classification: Conceptual

29) Creativity is most essential in which of the following steps of the decision-making process?
A) analyzing alternatives
B) allocating weights to the decision criteria
C) developing alternatives
D) identifying decision criteria
Answer: C
Page Ref: 181
Topic: The Decision-Making Process
Objective: 1
Difficulty: Easy
Classification: Conceptual

7
Copyright 2012 Pearson Education, Inc. Publishing as Prentice Hall
30) In the decision-making process, after allocating weights to the decision criteria, the decision-
maker must then _________.
A) list viable alternatives that could resolve the problem
B) allocate weights to each alternative that could resolve the problem
C) evaluate each alternative that could resolve the problem
D) rate all alternatives that could solve the problem using the decision criteria
Answer: A
Page Ref: 181
Topic: The Decision-Making Process
Objective: 1
Difficulty: Easy
Classification: Conceptual

31) Sue works in the finance department of a large multinational corporation. Her manager has
asked her to submit a detailed report on the department's quarterly expenses within the next two
days. Being pressed for time, Sue identifies three courses of action that could help her
accomplish her task-she can stretch her working hours till she finishes the report, she can ask her
colleague to chip in, or she could ask her manager for additional time. Which stage is Sue at in
the decision-making process?
A) selecting an alternative
B) identifying decision criteria
C) developing alternatives
D) evaluating decision effectiveness
Answer: C
Page Ref: 181
AACSB: Analytic Skills
Objective: 1
Difficulty: Moderate
Classification: Application

32) In the decision-making process, while ________, the decision maker puts the decision into
action by conveying it to those affected by it and getting their commitment to it.
A) selecting an alternative
B) evaluating a decision's effectiveness
C) implementing an alternative
D) analyzing alternatives
Answer: C
Page Ref: 182
Topic: The Decision-Making Process
Objective: 1
Difficulty: Easy
Classification: Conceptual

8
Copyright 2012 Pearson Education, Inc. Publishing as Prentice Hall
33) Which of the following is important in effectively implementing the chosen alternative in the
decision-making process?
A) evaluating each alternative by using the established criteria
B) being creative while implementing the alternatives
C) allowing those impacted by the outcome to participate in the process
D) ignoring criticism concerning your chosen alternative
Answer: C
Page Ref: 182
Topic: The Decision-Making Process
Objective: 1
Difficulty: Moderate
Classification: Conceptual

34) The final step in the decision-making process is to ________.


A) determine the criteria for the next decision
B) analyze the process of allocating weights to the decision criteria
C) evaluate the outcome of the decision
D) implement the chosen alternative
Answer: C
Page Ref: 182
Topic: The Decision-Making Process
Objective: 1
Difficulty: Moderate
Classification: Conceptual

35) Managers are assumed to use ________ if they make logical and consistent choices to
maximize value.
A) rational decision making
B) intuitive decision making
C) bounded rationality
D) evidence-based management
Answer: A
Page Ref: 183
Topic: Decision-Making Styles
Objective: 2
Difficulty: Easy
Classification: Conceptual

9
Copyright 2012 Pearson Education, Inc. Publishing as Prentice Hall
36) It is assumed that a rational decision maker ________.
A) faces unclear and ambiguous problems
B) is limited by his or her ability to process information
C) is unaware of all the possible alternatives and consequences
D) is fully objective and logical
Answer: D
Page Ref: 183
Topic: Decision-Making Styles
Objective: 2
Difficulty: Moderate
Classification: Conceptual

37) Which of the following is NOT a valid assumption about rationality?


A) The problem is clear and unambiguous.
B) A single, well-defined goal is to be achieved.
C) The decision maker is logical in his approach.
D) The decision maker accepts a solution that is good enough.
Answer: D
Page Ref: 183
Topic: Decision-Making Styles
Objective: 2
Difficulty: Moderate
Classification: Conceptual

38) When managers make decisions that are rational but limited by their ability to process the
information, they are following the concept of ________.
A) cognitive decision making
B) bounded rationality
C) escalation of commitment
D) intuitive decision making
Answer: B
Page Ref: 183
Topic: Decision-Making Styles
Objective: 2
Difficulty: Easy
Classification: Conceptual

10
Copyright 2012 Pearson Education, Inc. Publishing as Prentice Hall
39) Managers cannot possibly analyze all information on all alternatives, they tend to ________,
rather than ________.
A) maximize; satisfice
B) neutralize; satisfice
C) satisfice; neutralize
D) satisfice; maximize
Answer: D
Page Ref: 183
Topic: Decision-Making Styles
Objective: 2
Difficulty: Easy
Classification: Conceptual

40) ________ results in a solution that is considered "good enough."


A) Escalating
B) Linear thinking
C) Intuition
D) Satisficing
Answer: D
Page Ref: 183
Topic: Decision-Making Styles
Objective: 2
Difficulty: Easy
Classification: Conceptual

41) Toby is hunting for a new apartment. He is specifically looking for one that is located in the
heart of the city and should be available for $600 per month. However, Toby is also willing to
pay up to $850 per month for a place that is situated slighted away from the city center.
According to him, the second option "will also do." This is an example of ________.
A) rational decision making
B) bounded rationality
C) intuitive decision making
D) non linear thinking
Answer: B
Page Ref: 183-184
AACSB: Analytic Skills
Objective: 2
Difficulty: Moderate
Classification: Application

11
Copyright 2012 Pearson Education, Inc. Publishing as Prentice Hall
42) Julie is keen on joining Columbia University to pursue a master's degree in economics.
However, after three months of applying and waiting for an acceptance letter, she finally decides
to join NYU, which was one of her backup colleges. This is an example of ________.
A) maximizing
B) neutralizing
C) minimizing
D) satisficing
Answer: D
Page Ref: 183-184
AACSB: Analytic Skills
Objective: 2
Difficulty: Moderate
Classification: Application

43) Escalation of commitment refers to ________.


A) commitment to a faulty decision due to an unwillingness to go against the opinion of the
majority
B) an increased commitment to a previous decision despite evidence that it may have been
wrong
C) the strengthening of commitment to a particular course of action due to greater motivation by
others
D) greater commitment to a decision because of one's belief that it is "the right thing to do"
Answer: B
Page Ref: 184
Topic: Decision-Making Styles
Objective: 2
Difficulty: Moderate
Classification: Conceptual

44) In intuitive decision making, managers ________.


A) often tend to ignore their feelings or emotions
B) use data from their subconscious mind to help make their decisions
C) use available evidence to improve their decision making skills
D) do not depend on their past experiences to make decisions
Answer: B
Page Ref: 184
Topic: Decision-Making Styles
Objective: 2
Difficulty: Easy
Classification: Conceptual

12
Copyright 2012 Pearson Education, Inc. Publishing as Prentice Hall
45) All of the following are aspects of intuition EXCEPT ________.
A) experienced-based decisions
B) affect-initiated decisions
C) cognitive-based decisions
D) programmed decisions
Answer: D
Page Ref: 184
Topic: Decision-Making Styles
Objective: 2
Difficulty: Easy
Classification: Conceptual

46) Intuitive decision making ________.


A) is the systematic use of the best available evidence to improve decision making practice
B) generally results in poor decisions and hence managers should learn to ignore their gut
feelings
C) is the process of making decisions based on experience, feelings, and accumulated judgment
D) complements rational decision making but not bounded rational decision making
Answer: C
Page Ref: 184-185
Topic: Decision-Making Styles
Objective: 2
Difficulty: Moderate
Classification: Conceptual

47) ________ are straightforward, familiar, and easily defined.


A) Organic problems
B) Structured problems
C) Analogous problems
D) Nonprogrammed problems
Answer: B
Page Ref: 186
Topic: Types of Decisions and Decision-Making Conditions
Objective: 3
Difficulty: Easy
Classification: Conceptual

48) Structured problems align well with which type of decisions?


A) programmed
B) analogous
C) organic
D) nonlinear
Answer: A
Page Ref: 186
Topic: Types of Decisions and Decision-Making Conditions
Objective: 3
Difficulty: Easy
Classification: Conceptual
13
Copyright 2012 Pearson Education, Inc. Publishing as Prentice Hall
49) A(n) ________ decision is a repetitive decision that can be handled by a routine approach.
A) nonprogrammed
B) organic
C) nonlinear
D) programmed
Answer: D
Page Ref: 186
Topic: Types of Decisions and Decision-Making Conditions
Objective: 3
Difficulty: Easy
Classification: Conceptual

50) A procedure ________.


A) is an explicit statement that tells a manager what can or cannot be done
B) is a series of sequential steps a manager uses to respond to a structured problem
C) is used mainly for unstructured, rather than structured, problems
D) is subject to the interpretation of the decision maker
Answer: B
Page Ref: 186
Topic: Types of Decisions and Decision-Making Conditions
Objective: 3
Difficulty: Easy
Classification: Conceptual

51) A(n) ________ is an explicit statement that tells a manager what can or cannot be done.
A) agenda
B) objective
C) rule
D) solution
Answer: C
Page Ref: 186
Topic: Types of Decisions and Decision-Making Conditions
Objective: 3
Difficulty: Easy
Classification: Conceptual

52) A policy ________.


A) typically contains an ambiguous term
B) specifically states what should or should not be done
C) is a series of sequential steps a manager uses to respond to a structured problem
D) is used when dealing with unstructured problems and nonprogrammed decisions
Answer: A
Page Ref: 186
Topic: Types of Decisions and Decision-Making Conditions
Objective: 3
Difficulty: Easy
Classification: Conceptual

14
Copyright 2012 Pearson Education, Inc. Publishing as Prentice Hall
53) What is a difference between a policy and a rule?
A) A policy establishes general parameters for the decision maker.
B) A policy specifies what should or should not be done.
C) A policy is more explicit.
D) A rule typically contains an ambiguous term.
Answer: A
Page Ref: 186
Topic: Types of Decisions and Decision-Making Conditions
Objective: 3
Difficulty: Moderate
Classification: Conceptual

54) A(n) ________ typically contains an ambiguous term that leaves interpretation up to the
decision maker.
A) rule
B) procedure
C) edict
D) policy
Answer: D
Page Ref: 186
Topic: Types of Decisions and Decision-Making Conditions
Objective: 3
Difficulty: Easy
Classification: Conceptual

55) "Smoking and the consumption of alcohol are strictly prohibited inside the work premises."
This is most likely an example of a(n) ________.
A) rule
B) objective
C) procedure
D) axiom
Answer: A
Page Ref: 186
Topic: Types of Decisions and Decision-Making Conditions
Objective: 3
Difficulty: Moderate
Classification: Application

15
Copyright 2012 Pearson Education, Inc. Publishing as Prentice Hall
56) Which of the following is an example of a procedure?
A) Without exception, all employees in customer-facing roles must be formally attired at all
times.
B) Before going on a leave of absence, fill up the application form available on the company's
online leave management system. All applications will be approved/rejected within two days by
the employee's immediate supervisor.
C) We promote from within, whenever possible. If qualified applicants are available internally, a
job posting will be issued by the HR department providing the necessary details about all
vacancies.
D) Employees working with power tools must wear safety glasses at all times.
Answer: B
Page Ref: 186
AACSB: Analytic Skills
Objective: 3
Difficulty: Moderate
Classification: Application

57) Which of the following is an example of a policy?


A) Before going on a leave of absence, fill up the application form available on the company's
online leave management system. All applications will be approved/rejected within two days by
the employee's immediate supervisor.
B) Employees working with power tools must wear safety glasses at all times.
C) Smoking and the consumption of alcohol are strictly prohibited inside the work premises.
D) We are an equal opportunity employer with a diverse workforce. We do not discriminate
against employees and applicants on the basis of sex, race, color, religion, national origin, age,
disability, marital status, sexual orientation or veteran status.
Answer: D
Page Ref: 186
AACSB: Analytic Skills
Objective: 3
Difficulty: Moderate
Classification: Application

58) Unstructured problems ________.


A) refer to the usual problems faced by organizations
B) are generally solved using procedures, rules, and policies
C) are accompanied by ambiguous or incomplete information
D) do not require the decision maker to go through an involved decision process
Answer: C
Page Ref: 186
Topic: Types of Decisions and Decision-Making Conditions
Objective: 3
Difficulty: Easy
Classification: Conceptual

16
Copyright 2012 Pearson Education, Inc. Publishing as Prentice Hall
59) Nonprogrammed decisions ________.
A) involve standardized solutions
B) are usually made by lower-level managers
C) are associated with clear and specific goals
D) are unique and nonrecurring
Answer: D
Page Ref: 186
Topic: Types of Decisions and Decision-Making Conditions
Objective: 3
Difficulty: Easy
Classification: Conceptual

60) When problems are ________, managers must rely on ________ in order to develop unique
solutions.
A) structured; nonprogrammed decision making
B) structured; pure intuition
C) unstructured; nonprogrammed decision making
D) unstructured; programmed decision making
Answer: C
Page Ref: 186
Topic: Types of Decisions and Decision-Making Conditions
Objective: 3
Difficulty: Easy
Classification: Conceptual

61) Lower-level managers typically confront ________.


A) unstructured problems
B) new and unusual problems
C) programmed decisions
D) nonprogrammed decisions
Answer: C
Page Ref: 187
Topic: Types of Decisions and Decision-Making Conditions
Objective: 3
Difficulty: Easy
Classification: Conceptual

17
Copyright 2012 Pearson Education, Inc. Publishing as Prentice Hall
62) ________ is a situation where a manager has the ability to make accurate decisions because
the outcome of every alternative is known.
A) Certainty
B) Risk
C) Bureaucracy
D) Contingency
Answer: A
Page Ref: 187
Topic: Types of Decisions and Decision-Making Conditions
Objective: 3
Difficulty: Easy
Classification: Conceptual

63) If an individual knows the price of three similar cars at different dealerships, he is operating
under which of the following decision-making conditions?
A) risk
B) supposition
C) certainty
D) speculation
Answer: C
Page Ref: 187
Topic: Types of Decisions and Decision-Making Conditions
Objective: 3
Difficulty: Moderate
Classification: Conceptual

64) The manager of an apparel store estimates how much to order for the current spring season
based on last spring's sales figures. The store manager is operating under which of the following
decision-making conditions?
A) surety
B) risk
C) homogeneity
D) certainty
Answer: B
Page Ref: 187
Topic: Types of Decisions and Decision-Making Conditions
Objective: 3
Difficulty: Moderate
Classification: Application

18
Copyright 2012 Pearson Education, Inc. Publishing as Prentice Hall
65) Which of the following best describes the psychological orientation of an individual making
a "maximax" choice?
A) optimist
B) cynic
C) pessimist
D) defeatist
Answer: A
Page Ref: 188
Topic: Types of Decisions and Decision-Making Conditions
Objective: 3
Difficulty: Easy
Classification: Conceptual

66) Optimistic managers follow a maximax choice when they ________.


A) maximize the maximum possible payoff
B) maximize the minimum possible payoff
C) minimize the maximum regret
D) minimize the minimum regret
Answer: A
Page Ref: 188
Topic: Types of Decisions and Decision-Making Conditions
Objective: 3
Difficulty: Easy
Classification: Conceptual

67) What is the psychological orientation of a decision maker who makes a "maximin" choice?
A) optimist
B) realist
C) pessimist
D) idealist
Answer: C
Page Ref: 188
Topic: Types of Decisions and Decision-Making Conditions
Objective: 3
Difficulty: Easy
Classification: Conceptual

19
Copyright 2012 Pearson Education, Inc. Publishing as Prentice Hall
68) ________ is a situation in which a decision maker cannot make reasonable probability
estimates.
A) Necessity
B) Risk
C) Uncertainty
D) Certitude
Answer: C
Page Ref: 188
Topic: Types of Decisions and Decision-Making Conditions
Objective: 3
Difficulty: Easy
Classification: Conceptual

69) The ________ thinking style is characterized by a person's preference for using external data
and facts and processing this information through rational, logical thinking to guide decisions
and actions.
A) linear
B) normative
C) behavioral
D) organic
Answer: A
Page Ref: 190
Objective: 4
Difficulty: Easy
Classification: Conceptual

70) The ________ thinking style is characterized by a preference for internal sources of
information and processing this information with internal insights, feelings, and hunches to guide
decisions and actions.
A) active experimentation
B) nonlinear
C) linear
D) organic
Answer: B
Page Ref: 190
Objective: 4
Difficulty: Easy
Classification: Conceptual

20
Copyright 2012 Pearson Education, Inc. Publishing as Prentice Hall
71) Rules of thumb that managers use to simplify decision making are known as ________.
A) heuristics
B) folksonomies
C) algorithms
D) sophisms
Answer: A
Page Ref: 190
Topic: Decision-Making Styles
Objective: 4
Difficulty: Easy
Classification: Conceptual

72) When decision makers tend to think they know more than they do or hold unrealistically
positive views of themselves and their performance, they are exhibiting the ________.
A) selective perception bias
B) anchoring effect
C) self-serving bias
D) overconfidence bias
Answer: D
Page Ref: 190
Topic: Decision-Making Styles
Objective: 4
Difficulty: Easy
Classification: Conceptual

73) The ________ describes how decision makers fixate on initial information as a starting point
and then, once set, fail to adequately adjust for subsequent information.
A) anchoring effect
B) selective perception effect
C) confirmation bias
D) framing bias
Answer: A
Page Ref: 190
Objective: 4
Difficulty: Easy
Classification: Conceptual

21
Copyright 2012 Pearson Education, Inc. Publishing as Prentice Hall
74) Sophie is in charge of recruitment at her company. During a particular interview, the first
thing Sophie noticed about the applicant was that he was improperly attired. Though the
candidate possessed the necessary qualifications and effectively answered all her questions,
Sophie rejected him. This is an example of the ________.
A) randomness bias
B) self-serving bias
C) anchoring effect
D) representation bias
Answer: C
Page Ref: 190-191
AACSB: Analytic Skills
Objective: 4
Difficulty: Moderate
Classification: Application

75) When decision makers seek out information that reaffirms their past choices and discount
information that contradicts past judgments, they are exhibiting the ________.
A) framing bias
B) availability bias
C) representation bias
D) confirmation bias
Answer: D
Page Ref: 191
Topic: Decision-Making Styles
Objective: 4
Difficulty: Easy
Classification: Conceptual

76) The ________ occurs when decision makers select and highlight certain aspects of a
situation while excluding others.
A) framing bias
B) availability bias
C) representation bias
D) randomness bias
Answer: A
Page Ref: 191
Objective: 4
Difficulty: Easy
Classification: Conceptual

22
Copyright 2012 Pearson Education, Inc. Publishing as Prentice Hall
77) The ________ happens when decisions makers tend to remember events that are the most
recent and vivid in their memory.
A) self-serving bias
B) availability bias
C) representation bias
D) randomness bias
Answer: B
Page Ref: 191
Objective: 4
Difficulty: Easy
Classification: Conceptual

78) 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 ________.
A) self-serving bias
B) confirmation bias
C) randomness bias
D) framing bias
Answer: A
Page Ref: 191
AACSB: Analytic Skills
Objective: 4
Difficulty: Moderate
Classification: Application

79) Sarah's sales figure show that she has been the top performer in her department for the last
eight months. Two month prior to her annual performance review, Sarah's sales numbers fell due
to her ill health causing her manager to rate her performance as just satisfactory. This is an
example of the ________.
A) randomness bias
B) availability bias
C) self-serving bias
D) representation bias
Answer: B
Page Ref: 191
AACSB: Analytic Skills
Objective: 4
Difficulty: Moderate
Classification: Application

23
Copyright 2012 Pearson Education, Inc. Publishing as Prentice Hall
80) Martie 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. Martie reacts to this news by saying, "I knew all along that this would
happen." This is an example of the ________.
A) anchoring bias
B) randomness bias
C) self-serving bias
D) hindsight bias
Answer: D
Page Ref: 191
AACSB: Analytic Skills
Objective: 4
Difficulty: Moderate
Classification: Application

81) Pat is the manager of a large project that has been underway for the last eight months. It has
now become apparent that, due to various external factors, the project is unlikely to succeed.
Even though the best option would be to withdraw from the project, Pat continues to pump
money and resources into it in the hope that the project's prospects will change. He reasons that
he doesn't want all those months of hard work to go to waste. This is an example of the
________.
A) availability bias
B) hindsight bias
C) sunk costs error
D) self-serving bias
Answer: C
Page Ref: 191
AACSB: Analytic Skills
Objective: 4
Difficulty: Moderate
Classification: Application

82) To make effective decisions in today's fast-moving world, managers need to ________.
A) build organizations that shun complexity
B) know when it is time to call it quits
C) ignore cultural differences
D) build organizations that rely on their past successes
Answer: B
Page Ref: 193
Topic: Effective Decision Making in Today's World
Objective: 5
Difficulty: Easy
Classification: Conceptual

24
Copyright 2012 Pearson Education, Inc. Publishing as Prentice Hall
83) An effective decision-making process ________.
A) focuses on matters of importance
B) focuses on consistency more than logic
C) avoids subjective and intuitive thinking
D) is complex but reliable
Answer: A
Page Ref: 193
Objective: 5
Difficulty: Easy
Classification: Conceptual

The Car (Scenario)

Colleen is a student, and her older brother has loaned her an old car. The car is in need of several
repairs before she will feel comfortable driving it.

84) Colleen needs a vehicle, but she has to decide if the vehicle is worth repairing. She is facing
a(n) ________ that is a discrepancy between an existing and a desired state of affairs.
A) uncertainty
B) contingency
C) problem
D) risk
Answer: C
Page Ref: 179
Topic: The Decision-Making Process
AACSB: Analytic Skills
Objective: 1
Difficulty: Moderate
Classification: Application

85) Before talking to a repair person, Colleen needs to prioritize the repairs. Her first concern is
safety of the vehicle. This step in the decision-making process is called ________.
A) weighting the decision criteria
B) analyzing alternatives
C) identifying the decision criteria
D) evaluating decision effectiveness
Answer: C
Page Ref: 180
Topic: The Decision-Making Process
AACSB: Analytic Skills
Objective: 1
Difficulty: Moderate
Classification: Application

25
Copyright 2012 Pearson Education, Inc. Publishing as Prentice Hall
Is the Picture Clear? (Scenario)

Sharon was the regional manager of a large cable television company. She faced many problems
and decisions daily, such as how to price each market, whom to hire, what kind of technology to
purchase, and how to handle the increasing customer complaints. She needed some help sorting
these issues out.

86) When a customer calls and requests a refund for a partial month's usage of the cable service,
the fact that such situations are routine and most likely have a standard response would make the
response a ________ decision.
A) unstructured
B) nonprogrammed
C) speculative
D) programmed
Answer: D
Page Ref: 186
Topic: Types of Decisions and Decision-Making Conditions
AACSB: Analytic Skills
Objective: 3
Difficulty: Moderate
Classification: Application

87) Usually Sharon follows a ________, a series of interrelated sequential steps for responding
to a structured problem.
A) rule
B) policy
C) procedure
D) code
Answer: C
Page Ref: 186
Topic: Types of Decisions and Decision-Making Conditions
Objective: 3
Difficulty: Moderate
Classification: Conceptual

26
Copyright 2012 Pearson Education, Inc. Publishing as Prentice Hall
Managing Your Career (Scenario)

Michelle has a new job and is learning to perform the tasks assigned to her. Different situations
demand different decision-making processes.

88) Michelle finds a company directive that specifically restricts her from taking certain actions.
This is a(n) ________.
A) rule
B) policy
C) agenda
D) procedure
Answer: A
Page Ref: 186
Topic: Types of Decisions and Decision-Making Conditions
Objective: 3
Difficulty: Moderate
Classification: Conceptual

89) Michelle eventually finds a problem that has no cut-and-dry solution. The problem is unique
and is unlikely to occur again. This problem is ________ in nature.
A) structured
B) programmed
C) scheduled
D) nonprogrammed
Answer: D
Page Ref: 186
Topic: Types of Decisions and Decision-Making Conditions
Objective: 3
Difficulty: Moderate
Classification: Conceptual

27
Copyright 2012 Pearson Education, Inc. Publishing as Prentice Hall
Decision Making Biases and Errors (Scenario)

Newcastle United, a soccer club, was relegated from the top flight two seasons ago. Following
relegation, the club's board sacked the manager and hired a new manager to replace him. The
club won back promotion to the league and enjoyed a good season. Andy Carroll, the star player
for Newcastle, was the top scorer in the league for that season. However, the club, needing to
strengthen the team by buying new players, sold Andy Carroll to Liverpool soccer club to buy
three average players. The club is presently experiencing a dip in form and is in danger of being
relegated again.

90) Which of the following statements, if true, would indicate the presence of self-serving bias
on the part of the manager?
A) The manager assumes moral responsibility for the club's disappointing performance and
offers to resign from his position.
B) The manager buys Andy Carroll back from Liverpool at a much higher price to revive the
team's fortunes.
C) The manager blames the board for selling the top scorer and replacing him with below-par
players.
D) The manager threatens to quit if the board refuses to buy back Andy Carroll from Liverpool
immediately.
Answer: C
Page Ref: 191
AACSB: Reflective Thinking Skills
Objective: 4
Difficulty: Difficult
Classification: Critical Thinking

91) Which of the following statements, if true, best reflects sunk cost error on the part of the
board?
A) The board buys, a now out-of-form, Andy Carroll back from Liverpool at a much higher price
in the hopes of reversing the team's form.
B) The board admits that it underestimated Andy Carroll's real market value while selling him to
Liverpool.
C) The board blames the manager for buying three under-par players instead of one good
replacement for Andy Carroll.
D) The board backs the managerwho is confident that the team will be back in formto improve
the team's performance with its current players.
Answer: A
Page Ref: 191
AACSB: Reflective Thinking Skills
Objective: 4
Difficulty: Moderate
Classification: Critical Thinking

28
Copyright 2012 Pearson Education, Inc. Publishing as Prentice Hall
92) List and discuss the eight steps in the decision-making process.
Answer:
Step 1: Identifying a problem The decision-making process begins with the existence of a
problem or a discrepancy between an existing and a desired state of affairs. However, a
discrepancy without pressure to take action becomes a problem that can be postponed.
Step 2: Identify decision criteria - Once the manager has identified a problem that needs
attention, the decision criteria important to resolving the problem must be identified. That is,
managers must determine what is relevant in making a decision.
Step 3: Allocating weights to the criteria - The decision maker must weigh the items in order to
give them the correct priority in the decision. A simple approach of doing this is to give the most
important criterion a weight of 10 and then assign weights to the rest against that standard.
Step 4: Developing alternatives - The fourth step requires the decision maker to list the viable
alternatives that could resolve the problem. No attempt is made in this step to evaluate the
alternative, only to list them.
Step 5: Analyzing alternatives - Once the alternatives have been identified, the decision maker
must critically analyze each one. From this comparison, the strengths and weaknesses of each
alternative become evident.
Step 6: Selecting an alternative - The sixth step involves choosing the best alternative from
among those considered.
Step 7: Implementing the alternative - Implementation involves conveying the decision to those
affected by it and getting their commitment to it. If the people who must carry out a decision
participate in the process, they are more likely to enthusiastically support the outcome than if
they are just told what to do.
Step 8: Evaluating decision effectiveness - The last step in the decision-making process involves
appraising the outcome of the decision to see if the problem has been resolved. If the desired
result has not been achieved, the manager may consider returning to a previous step or may even
consider starting the whole decision process over.
Page Ref: 179-182
Topic: The Decision-Making Process
Objective: 1
Difficulty: Moderate
Classification: Conceptual

93) Briefly discuss the assumptions of rationality and the validity of those assumptions.
Answer: A decision maker who is perfectly rational is fully objective and logical. The problem
faced is clear and unambiguous. The decision maker has a clear and specific goal. He is aware of
all possible alternatives and consequences. Making decisions consistently leads to selecting the
alternative that maximizes the likelihood of achieving that goal.
These assumptions apply to any decision - personal or managerial. For managerial decision
making, an additional assumption is that decisions are made in the best interests of the
organization. However, most of these assumptions of rationality are not very realistic.
Page Ref: 183
Topic: Managers Making Decisions
Objective: 2
Difficulty: Moderate
Classification: Conceptual

94) What is meant by bounded rationality and satisficing?


29
Copyright 2012 Pearson Education, Inc. Publishing as Prentice Hall
Answer: Despite the unrealistic assumptions of perfect rationality, managers are expected to be
rational when making decisions. It is understood that "good" decision makers are supposed to do
certain things and exhibit good decision-making behaviors as they identify problems, consider
alternatives, gather information, and act decisively but prudently. When they do so, they show
others that they are competent and that their decisions are the result of intelligent deliberation.
However, a more realistic approach to describing how managers make decisions is the concept of
"bounded rationality." According to this concept, managers make decisions rationally, but are
limited by their ability to process information.
Because they cannot possibly analyze all information on all alternatives, managers "satisfice,"
rather than maximize. That is, they accept solutions that are "good enough." Thus, they become
rational within the limits of their ability to process information.
Page Ref: 183
Topic: Managers Making Decisions
Objective: 2
Difficulty: Moderate
Classification: Conceptual

95) Define intuitive decision making and identify the five different aspects of intuition.
Answer: Intuitive decision making is the process of making decisions on the basis of experience,
feelings, and accumulated judgment. Intuitive decision making can complement both rational
and bounded rational decision making. A manager who has had experience with a similar type of
problem or situation often acts quickly with limited information because of that past experience.
The five different aspects of intuition are:
a. Affect-initiated decisions - Managers make decisions based on feelings or emotions.
b. Cognitive-based decisions - Managers make decisions based on skills, knowledge, and
training.
c. Experience-based decisions - Managers make decisions based on their past experiences.
d. Subconscious mental processing - Managers use data from their subconscious to help them
make decisions.
e. Values or ethics-based decisions - Managers make decisions based on ethical values or culture.
Page Ref: 184-185
Objective: 2
Difficulty: Moderate
Classification: Conceptual

30
Copyright 2012 Pearson Education, Inc. Publishing as Prentice Hall
96) Discuss structured problems, programmed decisions, unstructured problems, and
nonprogrammed decisions.
Answer: Some problems are straightforward. The decision maker's goal is clear, the problem is
familiar, and information about the problem is easily defined and complete. Hence, these are
called structured problems. For instance, when a server spills a drink on a customer's coat the
customer is upset and the manager needs to do something. Because it is not an unusual
occurrence, there is some standardized routine for handling it. For example, the manager offers
to have the coat cleaned at the restaurant's expense. This is called a programmed decision, a
repetitive decision that can be handled by a routine approach. Because the problem is structured,
the manager does not have to go to the trouble and expense of going through an involved
decision process.
Not all the problems managers face can be solved using programmed decisions. Many
organizational situations involve unstructured problems, which are problems that are new or
unusual and for which information is ambiguous or incomplete. Whether to build a new
manufacturing facility in China is an example of an unstructured problem. When problems are
unstructured, managers rely on nonprogrammed decision making in order to develop unique
solutions. Nonprogrammed decisions are unique and nonrecurring and involve custom-made
solutions. Lower-level managers mostly rely on programmed decisions because they confront
familiar and repetitive problems. As managers move up the organizational hierarchy, the
problems they confront become more unstructured. However, few managerial decisions in the
real world are either fully programmed or nonprogrammed. Most fall somewhere in between.
Page Ref: 185-186
Topic: Types of Decisions and Decision-Making Conditions
Objective: 3
Difficulty: Moderate
Classification: Conceptual

31
Copyright 2012 Pearson Education, Inc. Publishing as Prentice Hall
97) Discuss the three types of programmed decisions that a manager depends on to resolve
structured problems.
Answer: Usually a manager relies on one of three types of programmed decisions to counter
structured problems: procedure, rule, or policy.
A procedure is a series of sequential steps a manager uses to respond to a structured problem.
Identifying the problem is a bit difficult. Once it is clear, so is the procedure. For instance, a
purchasing manager receives a request from a warehouse manager for 15 PDA handhelds for the
inventory clerks. The purchasing manager knows how to make this decision by following the
established purchasing procedure.
A rule is an explicit statement that tells a manager what can or cannot be done. Rules are
frequently used because they are simple to follow and ensure consistency. For example, rules
about lateness and absenteeism permit supervisors to make disciplinary decisions rapidly and
fairly.
The third type of programmed decisions is a policy, which is a guideline for making a decision.
In contrast to a rule, a policy establishes general parameters for the decision maker rather than
specifically stating what should or should not be done. Policies typically contain an ambiguous
term that leaves interpretation up to the decision maker.
Page Ref: 186
Topic: Types of Decisions and Decision-Making Conditions
Objective: 3
Difficulty: Moderate
Classification: Conceptual

98) Discuss the three different decision-making conditions that managers usually face.
Answer: When making decisions, managers usually face three different conditions: certainty,
risk, and uncertainty.
a. Certainty - The ideal situation for making decisions is one of certainty, which is a situation
where a manager can make accurate decisions because the outcome of every alternative is
known.
b. Risk - These are conditions in which the decision maker is able to estimate the likelihood of
certain outcomes. Under risk, managers have historical data from past personal experiences or
secondary information that lets them assign probabilities to different alternatives.
c. Uncertainty - This is a situation in which a decision maker has neither certainty nor reasonable
probability estimates available. Under these conditions, the choice of alternative is influenced by
the limited amount of available information and by the psychological orientation of the decision
maker. An optimistic manager follows a maximax choice (maximizing the maximum possible
payoff); a pessimist follows a maximin choice (maximizing the minimum possible payoff); and a
manager who desires to minimize his maximum "regret" opts for a minimax choice.
Page Ref: 187-188
Objective: 3
Difficulty: Moderate
Classification: Conceptual

32
Copyright 2012 Pearson Education, Inc. Publishing as Prentice Hall
99) Explain any six decision errors and biases that managers make.
Answer:
a. When decision makers tend to think they know more than they do or hold unrealistically
positive views of themselves and their performance, they are exhibiting the overconfidence bias.
b. The immediate gratification bias describes decision makers who tend to want immediate
rewards and to avoid immediate costs. For these individuals, decision choices that provide quick
payoffs are more appealing than those in the future.
c. 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. First impressions,
ideas, prices, and estimates carry unwarranted weight relative to information received later.
d. When decision makers selectively organize and interpret events based on their biased
perceptions, they are using the selective perception bias. This influences the information they
pay attention to, the problems they identify, and the alternatives they develop.
e. Decision makers who seek out information that reaffirms their past choices and discount
information that contradicts past judgments exhibit the confirmation bias. These people tend to
accept at face value information that confirms their preconceived views and are critical and
skeptical of information that challenges these views.
f. The framing bias is when decision makers select and highlight certain aspects of a situation
while excluding others. By drawing attention to specific aspects of a situation and highlighting
them, while at the same time downplaying or omitting other aspects, they distort what they see
and create incorrect reference points.
g. The availability bias is when decisions makers tend to remember events that are the most
recent and vivid in their memory. The result is that it distorts their ability to recall events in an
objective manner and results in distorted judgments and probability estimates.
h. When decision makers assess the likelihood of an event based on how closely it resembles
other events or sets of events, they commit the representation bias. Managers exhibiting this bias
draw analogies and see identical situations where they do not exist.
i. The randomness bias describes the actions of decision makers who try to create meaning out of
random events. They do this because most decision makers have difficulty dealing with chance
even though random events happen to everyone and there is nothing that can be done to predict
them.
j. The sunk costs error occurs when decision makers forget that current choices cannot correct
the past. They incorrectly fixate on past expenditures of time, money, or effort in assessing
choices rather than on future consequences.
k. Decision makers who are quick to take credit for their successes and to blame failure on
outside factors are exhibiting the self-serving bias.
l. The hindsight bias is the tendency for decision makers to falsely believe that they would have
accurately predicted the outcome of an event once that outcome is actually known.
Page Ref: 190-191
Topic: Decision-Making Styles
Objective: 4
Difficulty: Moderate
Classification: Conceptual

33
Copyright 2012 Pearson Education, Inc. Publishing as Prentice Hall
100) What can a manager do to make effective decisions in today's fast-moving world?
Answer: The following are a few guidelines that a manager can adhere to in order to make
effective decisions in today's fast-moving world:
a. Understand cultural differences
b. Know when it is time to call it quits.
c. Use an effective decision-making process.
d. Build an organization that can spot the unexpected and quickly adapt to the changed
environment.
Page Ref: 193
Objective: 5
Difficulty: Moderate
Classification: Conceptual

101) What are the five habits that highly reliable organizations (HROs) share?
Answer: According to Karl Weick, an organizational psychologist, organizations that can spot
the unexpected and quickly adapt to the changed environment are known as highly reliable
organizations (HROs). According to him, HROs share the following five habits:
a. HROs are not tricked by their success. They are preoccupied with their failures. They are alert
to the smallest deviations and react early and quickly to anything that does not fit with their
expectations.
b. HROs defer to the experts on the front line. Frontline workersthose who interact day in and
day out with customers, products, suppliers, and so forthhave firsthand knowledge of what can
and cannot be done, what will and will not work. These organizations get their input and allows
them to make decisions.
c. HROs let unexpected circumstances provide the solution.
d. HROs embrace complexity. Because business is complex, these organizations recognize that it
"takes complexity to sense complexity." Rather than simplifying data, these organizations aim for
deeper understanding of the situation.
d. HROs anticipate, but also recognize their limits. These organizations try to anticipate as much
as possible, but they recognize that they can't anticipate everything.
Page Ref: 194
Topic: Types of Decisions and Decision-Making Conditions
Objective: 5
Difficulty: Moderate
Classification: Conceptual

34
Copyright 2012 Pearson Education, Inc. Publishing as Prentice Hall

You might also like