MGT 103 - Chapter 4

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The process of choosing one alternative from among a set of
alternatives is called
a. rational ignorance.
b. altruism. D
c. bounded rationality.
d. decision making.
e. groupthink.
Which of the following statements is true about the decision-mak-
ing process?
a. It exclusively applies to problem situations.
b. It requires that the nature of a particular situation be defined.
B
c. It seldom applies to situations that are positive.
d. It typically involves only one individual and seldom applies to
groups.
e. It results in the generation of only one alternative.
Ryan, the production manager at the Tan Shoes Company, chose
the cheapest leather-cutting machine from a set of five machines
from different manufacturers. Ryan was engaged in
a. decision making.
A
b. optimizing.
c. rationalizing.
d. brainstorming.
e. social loafing.
Which of the following statements is true about the process of
decision making?
a. It ends when the decision situation has been defined.
b. It includes putting the chosen alternative to practice.
c. The first step in the process is to identify alternatives to a
B
problem.
d. The process is said to be complete when a set of alternatives
to a problem has been created.
e. In a business scenario, the decision-making process is always
aimed at finding a way to increase profits.
A(n) _____ decision is a decision that is relatively structured or
recurs with some frequency (or both).
a. custom-made
b. novel E
c. unstructured
d. intuitive
e. programmed
Decisions regarding standard organizational transactions are
most likely to be _____ decisions.
a. unstructured
b. infrequent C
c. programmed
d. intuitive
e. irrational
Nutrimax Inc. sponsors a football championship in Oriel in August
every year. The championship is organized by the Oriel Football
Association (OFA) to encourage new talent, and Nutrimax bears
all the expenses incurred during the championship. The Oriel
regional manager of Nutrimax sends across a check to the OFA in
July of each year in order for them to prepare for the championship.
The regional manager's decision about when to send the check A
to OFA is a(n) _____ decision.
a. programmed
b. unstructured
c. intuitive
d. contingency
e. satisficing

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When the low-indicator light turns red on the frozen drink machine,
Karen follows an established set of procedures to refill and reset
the machine. In doing so, she's making a(n) _____ decision.
a. programmed
A
b. unstructured
c. intuitive
d. irrational
e. strategic
A nonprogrammed decision
a. is relatively more frequent than programmed decisions.
b. is highly structured.
C
c. requires more time and resources than programmed decisions.
d. is typically regarding daily organizational transactions.
e. typically applies to basic operating systems and procedures.
Decisions made by top managers involving strategy, such as
signing mergers or making acquisitions, are examples of _____
decisions.
a. frequent
B
b. nonprogrammed
c. structured
d. operational
e. programmed
Non-programmed decisions
a. tend to be about basic operating systems and procedures.
b. generally deal with standard organizational transactions.
C
c. are less structured than programmed decisions.
d. occur more frequently than programmed decisions.
e. are typically made by shareholders.
R&D at Venus Electronics Inc. has created an innovative new
device. Management now needs to decide if Venus should launch
this device as its next new product. This is an example of a(n)
_____ decision.
a. structured B
b. nonprogrammed
c. standard
d. programmed
e. operational
Venus Electronics has been negotiating with the owner of a new
piece of property to move some of its operations. When the prop-
erty owner submitted his most recent counter offer, he said that
it was a final offer. The negotiator from Venus needs to decide
whether to accept or reject this offer. If it is a bluff, Venus may get
the property at a better price. If it is not a bluff, Venus will need
to resume its search for a new site. The negotiator is making this A
decision in a condition of
a. risk.
b. certainty.
c. ambiguity.
d. pressure.
e. uncertainty.
Which of the following statements is true in the context of decision
making under a state of risk?
a. The decision maker clearly knows the alternatives.
b. The decision maker uses probability estimates to assess alter-
natives.
B
c. The decision maker is least likely to choose a bad alternative.
d. The decision maker has an accurate understanding of payoffs
of all the alternatives.
e. The decision maker seldom considers his or her past experi-
ence while making the decision.

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In decision making, a condition of _____ exists when a decision
maker knows what the alternatives are and what conditions are
associated with each alternative.
a. risk
C
b. uncertainty
c. certainty
d. imperfect information
e. ambivalence
When Irene wants to buy new laptops for her marketing executives
and she has to pick them up from a single brand that is preinstalled
with the marketing software that her company needs, she's mak-
ing a decision under a condition of
a. imperfect information. D
b. ambiguity.
c. risk.
d. certainty.
e. unclear alternatives.
When decision makers do not know all the risks associated with
each alternative or the likely consequences of each one, they are
making decisions in a condition of
a. uncertainty.
A
b. certainty.
c. ambiguity.
d. risk.
e. programming.
Which of the following statements is true in the context of decision
making under a condition of uncertainty?
a. A decision maker greatly relies on intuition, judgment, and
experience.
b. A decision maker clearly knows all the risks associated with
alternatives to a problem.
A
c. A decision maker puts in least effort and uses a pre-determined
structure for decision making.
d. A decision maker is able to estimate the payoffs and risks
associated with alternatives.
e. A decision maker identifies only two alternatives to the decision
situation.
Professor Campbell needs to recommend a biology textbook
for his senior class. Only two well-known publishers, Educate
and WordTree, publish biology textbooks in the state, and both
publishers are known for the clarity and extensiveness of their
content. When Campbell chooses a textbook from one of the two
publishers, he is making a decision in a state of A
a. certainty.
b. irrationality.
c. risk.
d. imperfect information.
e. ambiguity.
Managers are most prone to error in a condition of
a. certainty.
b. uncertainty.
B
c. risk.
d. rationality.
e. perfect information.

R&D at Venus Electronics Inc. has created an innovative new

device. Management now needs to decide if Venus should launch
this device as its next new product now or wait for the next one.
Venus can estimate the costs to develop, produce, and market this
device as well as forecast sales. But there are many unknowns
in both the new product development and market conditions that
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Venus cannot accurately predict. Therefore, Venus is making this
decision under a condition of
a. risk.
b. certainty. C
c. uncertainty.
d. ambiguity.
e. security.
The classical decision model is a prescriptive approach, meaning
that it
a. provides managers with alternatives.
b. tells managers how they should make decisions. B
c. assumes all decisions are made subjectively.
d. allows no room for flexibility.
e. describes how decisions often are actually made.
According to the classical decision model, decision makers
a. have complete information about the decision situation.
b. are not able to eliminate uncertainty.
A
c. choose solutions that are in their personal best interests.
d. never make errors even under uncertain conditions.
e. are prone to error even in seemingly certain conditions.
The first step in rational decision making is
a. identifying alternatives.
b. implementing an alternative.
D
c. selecting the best alternative.
d. recognizing and defining the decision situation.
e. evaluating alternatives.
Tina works at a coffee shop. One of the four coffee machines at
the coffee shop has not been functioning well~ the same machine
has broken down thrice in two weeks. Now, Tina is looking at the
machine and trying to decide if the problem is a bad machine or
if people are just using the machine wrong. Tina is currently D
a. implementing an alternative.
b. evaluating the results of a chosen alternative.
c. consulting with other decision makers.
d. recognizing and defining the decision situation.
It was recently announced that Libra Inc. settled a lawsuit for $75
million. In the context of the rational decision making model, when
executives of the company announced that the settlement proved
to be "typical and fair" as
compared to similar cases, they were
E
a. developing a set of rational alternatives.
b. evaluating the possible alternatives.
c. consulting with other decision makers.
d. recognizing and defining the decision situation.
e. following up and evaluating the results of a chosen alternative.
After being laid off from his job, Joe recognized three options he
could choose from before he could secure a new job: to spend
less, to use savings, or to use credit. He went over every aspect of
his budget, and could not find any area where he could make a cut.
Therefore, the option to spend less was immediately eliminated
because C
a. it was not satisfactory.
b. it had negative consequences.
c. it was not feasible.
d. it was not bounded in reality.
e. it was not rational.
In general, while identifying alternatives, the more important the
decision,
a. the more alternatives should be generated.
b. the less the time needed to make the decision.
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c. the less the chances of managers making the right decision.
d. the more the tendency of managers to ignore intuitions.
A
e. the less the chances of managers using expert opinion to make
the decision.
Christine, a teacher, notices that the performances of her students
on class tests have been declining. While attempting to find a
solution to the problem, she thinks of three choices: rewarding
students who get good grades, holding class tests more often, or
punishing students when they perform poorly in the tests. Which
step of the rational decision-making process is Christine in? A
a. Identifying alternatives
b. Implementing an alternative
c. Defining the decision situation
d. Selecting the best alternative
e. Evaluating the decision effectiveness
EBM suggests treating the organization as an unfinished proto-
type, which means what?
a. Face the hard facts.
b. Encourage experimentation and learning by doing. B
c. Build a culture in which people tell the truth.
d. Get the best evidence and use it to guide actions.
e. Avoid decisions based on untested beliefs.
Delta Corp. introduced a new set of policies, giving its employees
more flexibility in work timings. This decision was made in re-
sponse to complaints from employees about fatigue. Which step of
the rational decision-making process is illustrated in the scenario?
a. Defining the situation D
b. Evaluating the possible alternatives
c. Selecting the alternative
d. Implementing an alternative
e. Evaluating decision effectiveness
When the prices of oil came down, the demand for sport util-
ity vehicles (SUVs) increased. Automakers chose to increase
production of full-size SUVs as the profit from large vehicles is
greater than that from small vehicles. Which step in the rational
decision-making model is illustrated in the scenario?
C
a. Developing a set of rational alternatives
b. Evaluating the possible alternatives
c. Selecting the best alternative and implementing it
d. Recognizing and defining the decision situation
e. Evaluating decision effectiveness
In which step of the rational decision-making model does the
decision maker test the feasibility and satisfactoriness
of alternatives before choosing one?
a. Identifying alternatives
E
b. Implementing the chosen alternative
c. Defining the situation
d. Following up the implementation
e. Evaluating alternatives

Peter was looking for alternatives to double his plant's production

capacity, and he considered acquiring the production plant of a
rival company. The engineers in Peter's company advised him
against it because acquiring the new plant would only increase
their company's production by 15 percent. Therefore, Peter's idea
B
failed the test for _____ in the context of the rational deci-
sion-making process.
a. feasibility
b. satisfactoriness
c. bounded rationality

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d. satisficing
e. escalation of commitment
In the rational decision-making model, once the alternatives have
been evaluated, the next step is to
a. select the best alternative.
b. implement the chosen alternative. A
c. evaluate the results of the chosen alternative.
d. identify the available alternatives.
e. define the decision situation.
_____ is a commitment to finding and using the best theory and
data available at the time to make a decision.
a. Rational decision making
b. Classical decision making D
c. Rational management
d. Evidence-based management
e. Bounded rationality
Which of the following statements is true in the context of selecting
the best alternative?
a. The decision maker should prioritize satisfactoriness over both
feasibility and consequences.
b. The decision maker can develop subjective estimates and
weights for choosing an alternative.
B
c. The decision maker must choose the alternative that involves
the most costs.
d. The decision maker must only stick to completely rational,
mathematical analysis while selecting an alternative.
e. The decision maker can choose an alternative that does not
pass the consequence, satisfactoriness, and feasibility test.
In the rational decision-making process, optimization means
a. identifying obvious, standard alternatives.
b. choosing the alternative with the best overall expected out-
comes.
c. gathering the most complete information before making the
B
decision.
d. developing the maximum number of creative, innovative alter-
natives.
e. choosing an alternative that is feasible even if it is not satisfac-
tory or has undesirable consequences.
What is one of the five principles of EBM?
a. Look for risks and drawbacks in recommendations.
b. Avoid unpleasant truths.
c. Discourage learning by doing. A
d. Use uncritical benchmarking of what winners do to make deci-
sions.
e. Make decisions based on strongly held beliefs.
A plant manager had taken a few measures to try to reduce worker
turnover. For four months he monitored the implementation of
the measures. He now finds that the turnover rate is reduced by
10 percent. Which step of the rational decision-making model is
illustrated in the scenario?
A
a. Evaluating the results
b. Identifying alternatives
c. Recognizing the decision situation
d. Selecting the best alternative
e. Developing a set of alternatives

_____ is one of the factors that makes an alternative infeasible.

a. Decrease in expenditure
E
b. Increase in production capacity
c. Low costs

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d. Increased satisfactoriness
e. Legal barriers
According to the evidence-based management approach, man-
agers must
a. discourage employees from telling the unpleasant truth.
b. be committed to fact-based decision making. B
c. avoid experimentation.
d. completely rely on the recommendations made by others.
e. base decisions on untested but strongly held beliefs.
Which of the following statements is true about the administrative
model of decision making?
a. It suggests that most managers make decisions rationally and
logically.
b. It suggests that decisions that are based on instincts are better
than the ones based on logic.
C
c. It suggests that managers tend to satisfice when making deci-
sions.
d. It suggests that managers have the most accurate information
about decision situations.
e. It suggests that managers should not make decisions based on
mathematical analysis.
By recognizing the _____ aspect of decision making, the admin-
istrative model better reflects subjective considerations.
a. rational
b. groupthink D
c. classical
d. behavioral
e. sequential
_____ was one of the first experts to develop the administrative
model of decision making.
a. Elton Mayo
b. George Bennett E
c. Martin Johnson
d. Jack Welch
e. Herbert Simon
Rather than prescribing how decisions should be made, the _____
model describes how they are made.
a. classical
b. rational C
c. administrative
d. realistic
e. practical
According to the administrative model, decision makers
a. use incomplete and imperfect information.
b. are never constrained by bounded rationality.
c. tend to avoid satisficing when making decisions. A
d. are not limited by their values and unconscious reflexes while
making decisions.
e. always act in the best interests of their organizations.
_____ is a concept suggesting that decision makers are limited by
their values and unconscious reflexes, skills, and habits.
a. Satisficing
b. Escalation of commitment E
c. Risk propensity
d. Groupthink
e. Bounded rationality

Bounded rationality is assumed in the _____ model of decision

making.
a. administrative

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b. rational
c. classical
A
d. groupthink
e. irrational
Which of the following statements is true about the administrative
model of decision making?
a. It suggests that political forces do not exist in business scenar-
ios.
b. It suggests that managers may not always make decisions that
best serve the interests of their organizations.
B
c. It suggests that managers use a blend of subjective knowledge
and analysis to choose the best alternative.
d. It suggests that decisions should only be made individually and
not in groups.
e. It suggests that decisions made by groups are better than
decisions made by individuals.
The administrative model of decision making
a. tells managers how they should make decisions.
b. describes how decisions are actually made.
B
c. predicts what decisions managers will make.
d. assumes decision makers use logic and reason.
e. is committed to fact-based decision making.
_____ is the tendency to search for alternatives only until one is
found that meets some minimum standard of sufficiency.
a. Satisficing
b. Groupthink A
c. Optimization
d. Bounded rationality
e. Escalation of commitment
Lucy needs to buy a new laptop for her business, and she buys
a particular brand even though it does not support the software
that is required for her business. She does this because all her
family members have used computers of the same brand all their
lives. This is an example of how decision makers are constrained
by _____. B
a. political forces
b. bounded rationality
c. Lucy's high risk propensity
d. logic
e. organizational strategies
Tim is the production manager at a steel factory. One of the steel
processing machines in the factory has broken down and has to
be replaced. Tim decides to buy a new machine from a company
that he has read reviews of in industry magazines, even though
there are other companies offering a discount on machines with
better functionality. This is an example of how managers are
A
constrained by _____.
a. bounded rationality
b. escalation of commitment
c. risk propensity
d. groupthink
e. political forces

Mike is in a hurry to appoint a personal assistant to help him with

scheduling his meetings with clients. He posts an advertisement
on a job website, and picks the first person who sends in her
resume for the job. He only checks for the candidate's qualification
C
and does not consider her work experience. This is an example of
_____.
a. rational decision making
b. classical decision making
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c. satisficing
d. evidence-based management
e. optimizing
Keisha is the vice president of accounting, and she has to decide
which computer software to purchase for her department. She has
looked at all of the possible alternatives and is leaning toward
the system with which she is most familiar. This is an example of
_____.
B
a. optimizing
b. bounded rationality
c. satisficing
d. synergy
e. escalation of commitment
_____ is one major element of organizational politics that is es-
pecially relevant to decision making.
a. Coalitions
b. Intuition A
c. Escalation of commitment
d. Satisficing
e. Risk propensity
Chelsea has been contemplating buying a red car. When she
visits the used cars dealership, she looks at a red Ford Hatchback
and buys it even before checking for its technical specifications.
Chelsea's decision is an example of _____.
a. optimization D
b. escalation of commitment
c. an evidence-based decision
d. satisficing
e. a decision under uncertainty
_____ is an innate belief about something without conscious
consideration.
a. Optimization
b. Intuition B
c. Logic
d. Ethics
e. Risk propensity
A marketing manager decides to launch a new product because it
is the first product that came to his mind, even if there are several
better products to be explored. Which of the following is illustrated
in the scenario?
a. Escalation of commitment D
b. Rational decision making
c. Bounded rationality
d. Satisficing
e. Optimization
Eric is a manager who recently introduced a new process for
screening potential employees. Eric has noticed that the new
screening process is not very efficient and is not helping recruiters
find the best candidates. However, Eric continues to use the same
process because it was so expensive to set up the initial system.
Which of the following concepts is illustrated in the scenario? B
a. Evidence-based decision making
b. Escalation of commitment
c. Rational decision making
d. Optimization
e. Satisficing
Ryan Tools Company just acquired Coney Tools. The purchase
came about because the employees in both the research and de-
velopment and the production departments at Ryan Tools joined
forces to lobby for the purchase of Coney Tools as opposed to
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other companies. Both departments wanted Coney Tools because
of its state-of-the-art research and production facilities. This is an
example of _____.
a. satisficing
E
b. intuitive decision making
c. a dissection
d. escalation of commitment
e. a coalition
William had invested in an initial public offering. He kept incurring
losses due to unfavorable market conditions. However, he decided
to keep the investment because he had spent so much money on
it. This scenario best exemplifies _____.
a. evidence-based management C
b. rational decision making
c. escalation of commitment
d. rationality
e. satisficing
_____ is a behavioral process in which a decision maker stays
with a decision even when it appears to be wrong.
a. Bounded optimization
b. Escalation of commitment B
c. Risk propensity
d. Strategic maximization
e. Intuitive rationality
Managers sometimes decide to do something because it feels
right or they have a hunch. This is an example of using _____ in
decision making.
a. satisficing
C
b. rationality
c. intuition
d. optimization
e. logic
_____ is the extent to which a decision maker is willing to gamble
when making a decision.
a. Risk propensity
b. Intuition A
c. Optimization
d. Satisficing
e. Bounded rationality
Managers with higher levels of risk propensity are more likely than
their conservative counterparts to:
a. adhere to the rational model and be extremely cautious about
their decisions.
b. avoid mistakes and infrequently make decisions that lead to big
C
losses.
c. rely heavily on intuition and gamble big investments on their
decisions.
d. reach decisions slowly after a great amount of analysis.
e. display no aggression in decision making.
A manager who has a high level of risk propensity is likely to:
a. make decisions quickly.
b. avoid risks.
A
c. spend a lot of time evaluating alternatives.
d. be wary of making a wrong choice.
e. rely heavily on mathematical analysis.
The nominal group decision-making technique:
a. involves maximum interaction among group members.
b. is used to generate creative and innovative ideas. B
c. is a technique in which members are not brought together in a
face-to-face setting.
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d. always results in groupthink.
e. is a technique in which the manager lacks the authority to reject
an alternative.
The Delphi group technique is a group decision-making technique
in which:
a. the members are involved in extensive discussions with each
other.
b. the opinions of group member are combined and averaged.
B
c. the daily operational problems of an organization are ad-
dressed.
d. the members are most likely to indulge in groupthink.
e. the members are most likely to be first-line employees belong-
ing to the same department.
One advantage of group decision making is:
a. groupthink.
b. saved time.
C
c. more acceptance of the final decision.
d. lowered cost of decision making.
e. elimination of political forces.
A disadvantage of using interacting groups to make decisions is
that:
a. it fosters political forces.
b. it discourages creativity. A
c. it generates very few alternatives.
d. it involves more costs than all other group decision techniques.
e. it does not foster understanding between members.
Which of the following is true of interacting groups?
a. They are the least common decision-making groups.
b. They effectively eliminate the possibility of groupthink.
C
c. They can be regular work teams.
d. They provide little scope for new ideas.
e. They do not involve political forces.
A(n) _____ is a form of group decision making in which a group
arrives at a consensus of expert opinion.
a. interacting group
b. Delphi group B
c. inactive group
d. unconventional group
e. unstructured group
Macy Computers Inc. faced a major software error that brought
all work in the company to a standstill. Roger, the CEO, arranged
for a panel of well-known engineers in the state to estimate the
time that it would take for the error to be set right. Each engineer
made an estimate and sent it to the group's leader, Dr. Rajesh.
Dr. Rajesh averaged the estimates and sent the average back out
to the group. People who had submitted unusual estimates were
B
asked to say why those estimates were chosen. Roger used a(n)
_____to help his company get rid of the software crisis.
a. interacting group
b. Delphi group
c. standing committee
d. work group
e. unstructured group
When managers want to be sure to get innovative and creative
ideas, they will often create a(n) ____ group.
a. judge-advisor system
b. coalition D
c. advocacy group
d. nominal group
e. political group
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A disadvantage of group decision making is that:
a. groupthink may occur.
b. generation of different opinions does not occur.
A
c. communication may be curbed.
d. knowledge available is always limited.
e. only a few alternatives are likely to be generated.
_____ is a situation that occurs when a group or team's desire for
consensus and cohesiveness overwhelms its desire to reach the
best possible decision.
a. Groupthink
A
b. Groupshift
c. Brainstorming
d. Condorcet's paradox
e. Group polarization
Which of the following is true of nominal groups?
a. Innovative ideas are not generated in nominal groups.
b. Members of nominal groups are brought together in a
face-to-face setting.
c. Members of nominal groups talk freely among themselves, B
argue, agree, form internal coalitions, and so forth.
d. Only one individual dominates a nominal group.
e. Nominal groups are most often used for forecasting technolog-
ical breakthroughs.
Which of the following disadvantages of group decisions typically
results from the group being very cohesive?
a. Disagreement
b. Groupthink B
c. Lower acceptance of the final decision
d. Minimal participation of members
e. Conflicts
Omega Inc., a large appliances company, went bankrupt because
of a series of poor managerial decisions and a downturn in the
economy. In retrospect, it would seem that there was too much
emphasis on the group reaching a consensus decision whenever
the managers were involved in decision making. As a result, many
decisions by the managers at Omega were made to avoid conflict.
What disadvantage of group decision making does this scenario B
represent?
a. Domination
b. Groupthink
c. Irrationality
d. Satisficing
e. Coalitions
Which of the following is an advantage of group decision making
when compared to individual decision making?
a. The group process is less expensive.
b. Groupthink is avoided. D
c. Less time is consumed.
d. More alternatives are likely to be generated.
e. Political forces are completely eliminated.
Groupthink:
a. results in more conflicts.
b. is most likely to occur in non-cohesive groups.
C
c. often leads to choosing a wrong alternative.
d. results in extensive brainstorming.
e. results in polarization.
Which of the following helps a manager avoid groupthink during
group decision making?
a. Assigning one person to act as devil's advocate
b. Making his or her preferences known to the group as early as
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possible
c. Instructing members to avoid expressing divergent viewpoints
d. Giving the group as much time as they need to make a decision, A
without enforcing a deadline
e. Encouraging group cohesiveness
Recognizing and defining the nature of a decision situation, iden-
tifying alternatives, choosing the best alternative, implementing it, decision-making
and evaluating the results constitute the _____ process.
U.S. Steel and the United Steelworkers announced an agreement
for a 3-year contract. The agreement is an example of a(n) _____ nonprogrammed
decision.
Sandra places orders for supplies for her bakery every month. This
programmed
is an example of a(n) _____ decision.
_____ decisions deal with unique situations that have never oc-
Nonprogrammed
curred before.
When managers are aware of all the alternatives in a deci-
sion-making situation and the conditions associated with each
certainty
alternative, they are said to be making the decision under a state
of _____.
The model of decision making that is prescriptive and assumes
that managers make rational and logical decisions is called the classical
_____ model.
Behavioral aspects of decision making include political forces,
_____, escalation of commitment, risk propensity, and intuition
ethics.
A(n) _____ is an informal alliance formed to achieve a common
coalition
goal.
_____ is the extent to which a decision maker is willing to gamble
Risk propensity
when making a decision.
A _____ is a form of group decision making in which a group
Delphi group
arrives at a consensus of expert opinion.
96. A(n) _____ is a decision-making group or team in which
members openly discuss, argue about, and agree on the best interacting group
alternative.

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