, Chapter 1 Introduction to Managerial Decision Making
Multiple choice
1) An optimal search for alternatives should last:
a. As long as needed to find the best solution.
b. As long as needed to find the first good enough solution.
c. As long as the cost of the search does not outweigh the value of the added information.
d. As long as the cost of the search is within the appropriate limits set by the decision maker.
Ans: c
Response: p. 2-3
2) Rating alternatives on each of the decision criteria is considered the most difficult stage of the
decision-making process, because:
a. It assumes we have precisely defined our priorities.
b. It requires us to forecast how each alternative solution will achieve each of our decision
criteria.
c. It requires us to compare all of the alternatives simultaneously.
d. It is likely to fail if our problem is not defined correctly, and this failure will not be detected.
Ans: b
Response: p. 3
3) In the interplay between system 1 and system 2 thinking, the key goal for managers is:
a. To improve their use of system 1 thinking.
b. To attempt to use system 2 thinking as much as possible.
c. To apply both systems in making decisions in order to perform a more thorough and
complex search for alternatives.
d. To identify when they should move from system 1 to system 2 thinking. Ans: d
Response: p. 4
, 4) Which of the following is a typical characteristic of heuristics?
a. They provide us with a simple way of dealing with complex problems.
b. They have the best likelihood of reaching an optimal solution to a problem.
c. They are time and resource consuming.
d. They are used mainly by irrational decision makers.
Ans: a
Response: p. 6
Questions 5-8 describe examples of heuristics outlined in the chapter. For each question, indicate which
heuristic it describes:
a. The representativeness heuristic.
b. The availability heuristic.
c. The confirmation heuristic.
d. The affect heuristic.
5) Inner city crime in the U.S. gets considerable media coverage, such that every homicide is
reported in the news. In contrast, a story of a person who died from a heart attack rarely makes
the news. This leads people to overestimate the frequency of deaths due to homicides relative
to those due to heart failure.
Ans: b
Response: p. 7-8
6) John is over seven feet tall. When asked whether John is a professional basketball player or a
software programmer, many people predict the former, even though there are many more
software programmers, even very tall ones, than professional basketball players. Ans: a
Response: p. 8-9
, 7) After reading about the positive effect chocolate has on student performance, a teacher gives
each student in a class a chocolate bar before taking an exam. 15 out of 22 students in that class
get an A on the exam. The teacher therefore concludes that chocolate enhances performance.
Ans: c
Response: p. 9-10
8) A common wisdom in politics is that the more an argument is repeated, the more it will be
considered by the public as reliable and true.
Ans: b
Response: p. 7-8
9) The affect heuristic can explain why
a. People who live in California are assumed to be happier than people who live in the
Midwest.
b. Students predict they will be sadder after getting a bad grade on a test than they
actually are in these situations.
c. People do not remember sad events from their early childhood.
d. Stock prices go up on sunny days.
Ans: d
Response: p. 10
True/False
10) Succumbing to heuristics is inevitable, and there is no way to make judgment less prone them.
Rather, one can only be aware of the biasing effect heuristics have on one’s judgment.
Ans: False
Response: p. 11
Multiple choice
1) An optimal search for alternatives should last:
a. As long as needed to find the best solution.
b. As long as needed to find the first good enough solution.
c. As long as the cost of the search does not outweigh the value of the added information.
d. As long as the cost of the search is within the appropriate limits set by the decision maker.
Ans: c
Response: p. 2-3
2) Rating alternatives on each of the decision criteria is considered the most difficult stage of the
decision-making process, because:
a. It assumes we have precisely defined our priorities.
b. It requires us to forecast how each alternative solution will achieve each of our decision
criteria.
c. It requires us to compare all of the alternatives simultaneously.
d. It is likely to fail if our problem is not defined correctly, and this failure will not be detected.
Ans: b
Response: p. 3
3) In the interplay between system 1 and system 2 thinking, the key goal for managers is:
a. To improve their use of system 1 thinking.
b. To attempt to use system 2 thinking as much as possible.
c. To apply both systems in making decisions in order to perform a more thorough and
complex search for alternatives.
d. To identify when they should move from system 1 to system 2 thinking. Ans: d
Response: p. 4
, 4) Which of the following is a typical characteristic of heuristics?
a. They provide us with a simple way of dealing with complex problems.
b. They have the best likelihood of reaching an optimal solution to a problem.
c. They are time and resource consuming.
d. They are used mainly by irrational decision makers.
Ans: a
Response: p. 6
Questions 5-8 describe examples of heuristics outlined in the chapter. For each question, indicate which
heuristic it describes:
a. The representativeness heuristic.
b. The availability heuristic.
c. The confirmation heuristic.
d. The affect heuristic.
5) Inner city crime in the U.S. gets considerable media coverage, such that every homicide is
reported in the news. In contrast, a story of a person who died from a heart attack rarely makes
the news. This leads people to overestimate the frequency of deaths due to homicides relative
to those due to heart failure.
Ans: b
Response: p. 7-8
6) John is over seven feet tall. When asked whether John is a professional basketball player or a
software programmer, many people predict the former, even though there are many more
software programmers, even very tall ones, than professional basketball players. Ans: a
Response: p. 8-9
, 7) After reading about the positive effect chocolate has on student performance, a teacher gives
each student in a class a chocolate bar before taking an exam. 15 out of 22 students in that class
get an A on the exam. The teacher therefore concludes that chocolate enhances performance.
Ans: c
Response: p. 9-10
8) A common wisdom in politics is that the more an argument is repeated, the more it will be
considered by the public as reliable and true.
Ans: b
Response: p. 7-8
9) The affect heuristic can explain why
a. People who live in California are assumed to be happier than people who live in the
Midwest.
b. Students predict they will be sadder after getting a bad grade on a test than they
actually are in these situations.
c. People do not remember sad events from their early childhood.
d. Stock prices go up on sunny days.
Ans: d
Response: p. 10
True/False
10) Succumbing to heuristics is inevitable, and there is no way to make judgment less prone them.
Rather, one can only be aware of the biasing effect heuristics have on one’s judgment.
Ans: False
Response: p. 11
