Judgment in Managerial Decision Making (8th Edition) – Test Bank for Managerial Decision-Making and Behavioral Economics

, Chapter 1 Introduction to Managerial Decision Making Y5 Y5 Y5 Y5 Y5 Y5




Multiple choice Y5




1) An optimal search for alternatives should last:
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a. As long as needed to find the best solution.
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b. As long as needed to find the first good enough solution.
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c. As long as the cost of the search does not outweigh the value of the added information.
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d. As long as the cost of the search is within the appropriate limits set by the decision
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maker. Ans: c
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Response: p. 2-3 Y5 Y5




2) Rating alternatives on each of the decision criteria is considered the most difficult stage of
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the decision-making process, because:
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a. It assumes we have precisely defined our priorities.
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b. It requires us to forecast how each alternative solution will achieve each of our
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decision criteria.
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c. It requires us to compare all of the alternatives simultaneously.
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d. It is likely to fail if our problem is not defined correctly, and this failure will not be
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detected. Ans: b
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Response: p. 3 Y5 Y5




3) In the interplay between system 1 and system 2 thinking, the key goal for managers is:
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a. To improve their use of system 1 thinking.
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b. To attempt to use system 2 thinking as much as possible.
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c. To apply both systems in making decisions in order to perform a more thorough
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and complex search for alternatives.
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d. To identify when they should move from system 1 to system 2 thinking.
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Ans: d Response: p. 4
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, 4) Which of the following is a typical characteristic of heuristics?
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a. They provide us with a simple way of dealing with complex problems.
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b. They have the best likelihood of reaching an optimal solution to a problem.
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c. They are time and resource consuming. Y5 Y5 Y5 Y5 Y5




d. They are used mainly by irrational decision makers.
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Ans: a Y5




Y5 Response: p. 6 Y5 Y5




Questions 5-8 describe examples of heuristics outlined in the chapter. For each question, indicate which
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heuristic it describes:
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a. The representativeness heuristic.
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b. The availability heuristic.
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c. The confirmation heuristic.
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d. The affect heuristic.
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5) Inner city crime in the U.S. gets considerable media coverage, such that every homicide is
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reported in the news. In contrast, a story of a person who died from a heart attack rarely
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makes the news. This leads people to overestimate the frequency of deaths due to
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homicides relative to those due to heart failure.
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Ans: b Y5




Y 5 Response: p. 7- Y5 Y5




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6) John is over seven feet tall. When asked whether John is a professional basketball player
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Y5or a software programmer, many people predict the former, even though there are
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Y5 many more software programmers, even very tall ones, than professional basketball
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Y5 players. Ans: a Y5




Response: p. 8-9 Y5 Y5

, 7) After reading about the positive effect chocolate has on student performance, a teacher
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Y5 gives each student in a class a chocolate bar before taking an exam. 15 out of 22 students in
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Y5 that class get an A on the exam. The teacher therefore concludes that chocolate enhances
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Y5 performance. Ans: c Y5 Y5




Response: p. 9-10 Y5 Y5




8) A common wisdom in politics is that the more an argument is repeated, the more it will
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be considered by the public as reliable and true.
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Ans: b Y5




Y 5 Response: p. 7- Y5 Y5




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9) The affect heuristic can explain why
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a. People who live in California are assumed to be happier than people who live in
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the Midwest. Y5 Y5




b. Students predict they will be sadder after getting a bad grade on a test than
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they actually are in these situations.
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c. People do not remember sad events from their early childhood.
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d. Stock prices go up on sunny days. Y5 Y5 Y5 Y5 Y5 Y5




Ans: d Y5




Y5 Response: p. Y5




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True/False


10) Succumbing to heuristics is inevitable, and there is no way to make judgment less prone
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Y5them. Rather, one can only be aware of the biasing effect heuristics have on one’s
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Y5judgment.

Ans: False Y5




Y5 Response: p. Y5




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