Chap007 Test Bank
Chap007 Test Bank
Chap007 Test Bank
Chapter 07
Decision Making, Learning, Creativity, and Entrepreneurship
TEST PLANNING TABLE FOR CHAPTER 7
2. Describe the six steps that managers 16, 17, 20, 15, 18, 19, 86, 101, 103
should take to make the best decisions, 21, 69, 72, 70, 71, 76,
and explain how cognitive biases can 73, 74, 75, 102
lead managers to make poor decisions. 77, 78, 79,
80, 81, 82,
83, 84, 85, 87
3. Identify the advantages and 22, 23, 88, 89 24, 25 104, 106
disadvantages of group decision making,
and describe techniques that can improve
it.
4. Explain the role that organizational 26, 28, 29, 27, 30 105, 106, 107
learning and creativity play in helping 90, 91, 92,
managers to improve their decisions. 93, 94, 95
5. Describe how managers can encourage 32, 33 31, 34, 96, 108
and promote entrepreneurship to create a 97, 109
learning organization, and differentiate
between entrepreneurs and intrapreneurs.
7-1
1. Managers make decisions whenever they are engaged in planning, organizing, leading, or
controlling.
True False
5. A manager who makes a decision based on his judgment is using a less rational process
than a manager who makes a decision using her intuition.
True False
7. The classical decision making model assumes that managers have all of the information
they need in order to make the optimum decision.
True False
7-2
8. The classical decision making model is prescriptive in the sense that it specifies how
decisions should be made.
True False
9. March and Simon's Administrative Model is consistent with the classical model of
decision-making.
True False
10. According to the Administrative Model, managers can never have complete information
when they are trying to make a nonprogrammed decision because the complete range of
decision-making alternatives is unknowable.
True False
11. When managers know the possible outcomes of a decision and can assign probabilities to
each of these outcomes in terms of their likelihood of occurrence, a situation called risk
occurs.
True False
12. When the outcomes of decision alternatives are known and their probabilities can be
determined, a situation of uncertainty exists.
True False
13. When a manager chooses an acceptable alternative instead of the optimum alternative, we
say that a satisficing decision has occurred.
True False
14. According to March and Simon, managerial decision making is frequently more of a
science than an art, especially when nonprogrammed decisions are involved.
True False
7-3
15. Managers can be reactive in recognizing the need for a decision, but not proactive.
True False
16. A common reason for poor decisions is that managers fail to specify the criteria that are
important for making that particular decision.
True False
17. When managers are concerned with the legality of a decision, they are concerned with the
practicality of the decision.
True False
18. Rules of thumb that simplify the decision making process are a form of systematic error.
True False
19. Errors that managers make over and over again without learning from their mistakes are
known as heuristics.
True False
20. When a manager generalizes inappropriately from a small sample to a new situation and
makes a poor decision as a result, representativeness bias has occurred.
True False
21. Pat, a manager, committed a large amount of resources to a potential new product. Later,
Pat received feedback that the product would not succeed but continued to commit major
resources in an attempt to save the project from ruin. Escalating commitment has occurred on
Pat's part.
True False
7-4
22. A member of a group challenges the decision that is being made by the group in an
attempt to make the group think carefully about the pros and cons of a particular alternative.
We say that this member of the group is playing the role of the devil's advocate.
True False
23. When the members of a group try hard to agree, even when it is done without accurately
assessing the information available to the group, we say that groupthink has occurred.
True False
24. Devil's advocacy and dialectical inquiry can both be used to help reverse the effects of
groupthink in group decision making.
True False
25. Dialectical inquiry is easier to use than devil's advocacy to blunt the effects of groupthink
in group decision making.
True False
26. The ability of a decision maker to discover novel ideas that lead to feasible alternatives in
decision-making is known as creativity.
True False
27. According to Senge's concept of the learning organization, team learning is less important
than individual learning when trying to increase organizational learning.
True False
7-5
29. When a group meets face-to-face and attempts to generate a wide variety of alternatives as
possible solutions to a problem without criticizing them until all of the alternatives have been
presented, brainstorming has occurred.
True False
30. In brainstorming sessions, the fewer alternatives presented, the better the brainstorming
session.
True False
34. The higher the level of intrapreneurship in a firm, the higher will be the level of learning
and innovation.
True False
7-6
35. The process by which managers respond to opportunities and threats facing their
organization by analyzing options and taking actions is known as:
A. Brainstorming
B. Intuition
C. Decision making
D. Bounded rationality
E. Heuristics
36. Managers make decisions when they are involved in which managerial function?
A. Planning
B. Controlling
C. Leading
D. Organizing
E. All of the above
37. Decisions that have been made many times in the past and for which managers have rules
and guidelines as to how to make similar decisions in the future are known as:
A. Nonprogrammed decisions
B. Heuristic decisions
C. Programmed decisions
D. Intuitive decisions
E. Creative decisions
38. Mary schedules a meeting with Clarise, a subordinate, because Clarise's performance has
dropped below a certain level. What type of decision does this represent?
A. Intuition
B. Groupthink
C. Programmed
D. Nonprogrammed
E. Satisficing
7-7
39. Jose, a plant supervisor, orders machine screws whenever his inventory of screws falls
below two cases. This is an example of which type of decision?
A. Intuition
B. Satisficing
C. Nonprogrammed
D. Programmed
E. Groupthink
40. Barbara, a school superintendent, asks the local school board for permission to hire an
additional teacher whenever the student enrollment at a certain grade level within a school
increases by 35 students beyond capacity. This is an example of which type of decision?
A. Programmed
B. Groupthink
C. Nonprogrammed
D. Intuition
E. Satisficing
41. Peggy, a plant foreman, asks the plant superintendent to hire an additional worker
whenever overtime hours for the previous month increase by more than 15 percent over the
headcount. This is an example of which type of decision?
A. Intuition
B. Groupthink
C. Satisficing
D. Programmed
E. Nonprogrammed
42. When an organization's accounting department sends out a bill to a new customer, what
type of decision does this represent?
A. Programmed
B. Nonprogrammed
C. Intuition
D. Groupthink
E. Bounded rationality
7-8
43. Achmed, an office manager, orders photocopy paper whenever the number of cases of
paper in the storeroom falls below a certain amount. This represents which type of decision?
A. Satisficing
B. Programmed
C. Intuition
D. Nonprogrammed
E. None of the above
44. Nonroutine decisions made in response to novel situations in business are known as:
A. Intuitive decisions
B. Creative decisions
C. Programmed decisions
D. Heuristic decisions
E. Nonprogrammed decisions
45. When a manager makes a good decision based on a "gut feeling," this is known as:
A. A programmed decision
B. A nonprogrammed decision
C. A heuristic decision
D. An intuitive decision
E. The illusion of control
46. The manager's ability to develop a sensible opinion based on the way that she evaluates
the importance of the available information is known as:
A. Intuition
B. Satisficing
C. Heuristics
D. Judgment
E. Creativity
7-9
47. Acme Explosives is trying to decide whether or not to launch nationally a new product
that this organization has never sold previously. This represents which type of decision for the
organization?
A. Programmed
B. Intuition
C. Groupthink
D. Nonprogrammed
E. Satisficing
48. WashUrCar, which operates five car washes, is attempting to decide whether or not it
should purchase a new type of drying equipment. This represents which type of decision for
the organization?
A. Programmed
B. Nonprogrammed
C. Groupthink
D. Intuition
E. Satisficing
49. Jersey Office Supply Company is attempting to decide whether or not to launch a new $10
million advertising campaign for a service where office supplies are guaranteed to be
delivered to customers locations twice a day. Sales for this service have been lagging well
below what was projected. This represents which type of decision for the organization?
A. Groupthink
B. Intuition
C. Programmed
D. Nonprogrammed
E. Satisficing
50. Peck's Frozen Custard has been focusing on a target market located in northwestern
Virginia. They are attempting to decide whether to expand stores to the Washington, D.C.
metropolitan area. What type of decision is this?
A. Intuition
B. Nonprogammed
C. Groupthink
D. Satisficing
E. Programmed
7-10
51. When we say that the classical model of decision-making specifies how managers should
make decisions, this is another way of saying that this model is:
A. Heuristic
B. Prescriptive
C. Incomplete
D. Intuitive
E. Satisficing
52. In the classical model of decision-making, the most appropriate decision given the likely
future consequences to the organization is known as the ____________ decision.
A. Intuitive
B. Creative
C. Heuristic
D. Obvious
E. Optimum
53. All but one of the following are important aspects of the administrative model of decision
making. Which one?
A. Satisficing
B. Incomplete information
C. Bounded rationality
D. Brainstorming
E. None of the above
54. In the administrative model of decision making, when the number of possible alternatives
to a decision is so large that the manager cannot possibly evaluate all of them before making a
decision, this is called:
A. Satisficing
B. Bounded rationality
C. Brainstorming
D. Devil's advocacy
E. Optimizing
7-11
55. According to the administrative model of decision making, if managers cannot possibly
specify all of the possible alternatives to a decision, this is the result of:
A. Incomplete information
B. Bounded rationality
C. An optimum decision
D. Brainstorming
E. None of the above
56. Managers in biotechnology know that new drugs have a 10% chance of passing advanced
clinical trials. This is an example of:
A. Risk
B. Uncertainty
C. Bounded rationality
D. Incomplete information
E. Satisficing
57. When managers know the possible outcomes of a decision and can assign probabilities to
each of these outcomes in terms of their likelihood of occurrence in the future, this is known
as:
A. Uncertainty
B. Certainty
C. Risk
D. Bounded rationality
E. Dialectical inquiry
58. An organization introduces a new product unlike any previously on the market, for which
it cannot estimate the probability of success. This condition is called:
A. Risk
B. Uncertainty
C. Bounded rationality
D. Incomplete information
E. Satisficing
7-12
59. When managers cannot assign probabilities of future occurrence to possible alternatives to
a decision, this is known as:
A. Certainty
B. Risk
C. Bounded rationality
D. Uncertainty
E. Dialectical inquiry
61. Eileen, a college professor, is attempting to choose the best textbook for an upcoming
course. After reviewing ten of the twenty possible choices, she runs out of time, and chooses
one. What has she done?
A. Optimized
B. Brainstormed
C. Bounded her rationality
D. Satisficed
E. Used devil's advocacy
62. When the meaning of the information available to a manager is unclear and can be
interpreted in several ways, the information is:
A. Certain
B. Ambiguous
C. Bounded
D. Irrational
E. All of the above
7-13
63. When the information available to a manager is incomplete because the manager must
make a decision quickly, this is known as:
A. Bounded rationality
B. Devil's advocacy
C. Dialectical inquiry
D. A time constraint
E. An information cost
64. Chris, the fleet manager for an office supply company, has limited staff and between
himself and them, they don't have enough time to evaluate all possible alternative new
delivery trucks the company might buy. Chris is suffering from:
A. Bounded irrationality
B. A time constraint
C. An information cost
D. Dialectical inquiry
E. Devil's advocacy
65. A manager considers a limited sample of the potential alternative solutions for a problem
and selects one that is acceptable instead of attempting to select the optimum solution. This
type of decision is called:
A. Programmed
B. Intuition
C. Certainty
D. Satisficing
E. Heuristics
66. Paramount Kitchen Countertops decides to ask three advertising agencies to pitch a
proposal to handle the organization's business, instead of asking all of the advertising agencies
in the city where this organization's headquarters are located to pitch the account. What type
of decision does this represent?
A. Programmed
B. Nonprogrammed
C. Satisficing
D. Certainty
E. Illusion of control
7-14
67. The purchasing manager for Ford Motor Co. decides to call three suppliers of automobile
windshields to ask for bids on an order for windshields for a new Ford car, instead of calling
fifty possible windshield suppliers for such a bid. What type of decision does this represent
for the purchasing manager?
A. Nonprogrammed
B. Illusion of control
C. Certainty
D. Programmed
E. Satisficing
68. In August of 1985, Sun Microsystems had to decide whether to go ahead with the launch
of its new Canera workstation computer. This represented:
A. A programmed decision under uncertainty
B. A programmed decision under risk
C. A nonprogrammed decision under uncertainty
D. A nonprogrammed decision under risk
E. None of the above
69. Based on the work of March & Simon's Administrative Model, the first step in the
managerial decision-making process is to:
A. Choose among alternatives.
B. Assess alternatives.
C. Implement the chosen alternative.
D. Recognize the need for a decision.
E. Generate alternatives.
70. In assessing alternatives for a decision, managers typically use all but one of the following
criteria. Which one?
A. Legality
B. Dialectical inquiry
C. Economic feasibility
D. Practicality
E. Ethicalness
7-15
71. A marketing manager wants to budget the advertising for a new product launch. She is
trying to determine the amount of money that her company can afford to spend on advertising
this new product. On which criterion of decision-making is this marketing manager focusing?
A. Legality
B. Ethicalness
C. Economic feasibility
D. Practicality
E. None of the above
72. Christina performs a financial analysis of each alternative in order to determine which one
is most likely to impact the organization's profitability. She is focusing on which criterion for
decision-making?
A. Practicality
B. Ethicalness
C. Economic feasibility
D. Dialectical inquiry
E. Legality
73. Dan, a manager is attempting to determine whether he has both the capability and the
resources to implement one of the possible alternative solutions to a problem. Dan is focusing
on which criterion for decision-making?
A. Practicality
B. Ethicalness
C. Legality
D. Economic feasibility
E. Dialectical inquiry
74. Dale, a manager, is assessing possible alternatives for the solution of a problem. As Dale
does so, he attempts to determine if a possible alternative will threaten other company
projects. On which criterion for decision-making is Dale focusing?
A. Economic feasibility
B. Practicality
C. Legality
D. Ethicalness
E. None of the above
7-16
75. Pat, a manager, is assessing possible alternatives for the solution of a problem. Pat
performs a cost-benefit analysis of several alternatives in order to determine the net financial
payoff of each alternative. On which criterion for decision-making is Pat focusing?
A. Economic feasibility
B. Practicality
C. Ethicalness
D. Legality
E. Dialectical inquiry
76. When managers who were responsible for the decision to launch the Challenger space
shuttle were attempting to balance the conflicting demands for ensuring the safety of the
astronauts with the desire to obtain future funding for the U.S. space program, on which
decision-making criterion were these managers focusing?
A. Practicality
B. Legality
C. Ethicalness
D. Economic feasibility
E. None of the above
77. The explosion of the space shuttle Challenger is an example of poor managerial decision-
making where managers neglected the criterion of:
A. Ethicalness
B. Practicality
C. Legality
D. Economic feasibility
E. Devil's advocacy
78. Based on March and Simon's Administrative Model, the last step in the managerial
decision-making process is to:
A. Generate alternatives
B. Learn from feedback
C. Recognize the need for a decision
D. Implement the chosen alternative
E. Choose among alternatives
7-17
79. In managerial decision-making, "rules of thumb" that are useful to managers because they
simplify the decision-making process are called:
A. Dialectical inquires
B. Decision biases
C. Heuristics
D. NGT's
E. Delphi's
80. Mistakes in decision-making that some managers make over and over again without
learning from their mistakes are known as:
A. Dialectical errors
B. Devil's errors
C. Intuition
D. Groupthink
E. Systematic errors
81. When a manager persists in a belief even when she is given information that indicates that
this belief is incorrect, this is called:
A. Devil's advocacy
B. Groupthink
C. Prior hypothesis bias
D. Dialectical inquiry
E. A satisficing
82. When a manager makes a decision based on a generalization from a very small sample of
information, this is known as:
A. Dialectical inquiry
B. Systematic errors
C. Devil's advocacy
D. Representative bias
E. The illusion of control
7-18
83. The tendency to overestimate one's own ability to influence actions and events is called:
A. Escalating commitment
B. Illusion of control
C. Prior hypothesis bias
D. Representativeness bias
E. Dialectical inquiry
84. When an organization has committed significant resources to a project and the project
manager continues to invest the organization's resources in this project even when he receives
information that the project is badly failing, this is called:
A. Systematic errors
B. Devil's advocacy
C. Dialectical inquiry
D. Heuristics
E. Escalating commitment
85. Escalating commitment to a managerial decision could ignore evidence that the project is:
A. Impractical
B. Illegal
C. Unethical
D. Uneconomical
E. All of the above
7-19
87. Members of a group strive so hard to agree on an important decision that they ignore
information that is counter to the evidence supporting the point-of-view that they are
considering adopting. This is known as:
A. Dialectical inquiry
B. Devil's advocacy
C. Groupthink
D. Intuition
E. Representative bias
88. A member of a group challenges the decision toward which the group is leaning so that
the group considers carefully all of the unacceptable possible outcomes of the alternative that
the group is considering. This is known as:
A. Dialectical inquiry
B. Devil's advocacy
C. Groupthink
D. Programmed decision-making
E. A satisficing decision
89. Two separate groups of managers are given a problem to solve, and then each group
presents its proposed solution to top management in an attempt to determine the best course of
action. This process is called:
A. Devil's advocacy
B. Groupthink
C. Dialectical inquiry
D. The classical decision-making model
E. A satisficing decision
90. The process through which managers attempt to improve the ability of subordinates to
understand and to manage the organization is known as:
A. Dialectical inquiry
B. Devil's advocacy
C. Groupthink
D. Organizational learning
E. Intuition
7-20
91. An organization in which managers do all that they can to maximize the ability of
subordinates to think creatively so as to maximize the potential for organizational learning is
called:
A. A learning organization
B. A dialectical organization
C. A groupthink organization
D. An intuitive organization
E. A heuristics organization
93. A group of managers meets face-to-face and generates and debates a wide variety of
alternatives from which to make a decision. This is called:
A. Delphi technique
B. Dialectical inquiry
C. Brainstorming
D. Nominal group technique
E. Programmed decision making
94. After hearing one member describe a problem to be addressed, all members of a group
first write down ideas and solutions. After this, everyone shares those suggestions without
criticism. The group, one by one, clarified, and critiqued then discusses the alternatives.
Finally, each member ranks all the alternatives, and the highest-ranking alternative is chosen.
This process is called:
A. Delphi technique
B. Dialectical inquiry
C. Brainstorming
D. Nominal group technique
E. Programmed decision making
7-21
Essay Questions
7-22
99. Discuss the assumptions that underlie the classical model of decision-making. What are
the implications of this model?
100. March and Simon developed three important concepts in their administrative model of
decision-making. Discuss these three concepts and explain how they would apply to a realistic
business decision situation of your choosing.
101. Researchers have identified a six-step model that can be used by managers who are faced
with an important decision. Discuss these steps as they would apply to an important and
realistic business situation of your choosing.
102. One of the main reasons that managers make poor decisions is that they fail to specify in
advance the decision-making criteria that they will use when making the decision. Discuss the
four criteria that are generally used by managers in evaluating the advantages and
disadvantages of alternative courses of action in an important decision-making situation.
7-23
103. Managers sometimes make poor decisions because of cognitive bias in their decision-
making process. Discuss three of the four sources of bias that can adversely affect the ability
of managers to make a good decision, and illustrate each of them with a realistic business
decision-making situation.
104. Identify the advantages and disadvantages of group decision-making. Describe at least
two ways that groups can overcome some disadvantages, using an example of a group of
students doing a course project.
7-24
106. Peter Senge has identified five principles that can be used by an organization to create a
"learning organization." Discuss any three of these principles and explain how they could be
applied to an organization in order to create this type of organization.
107. There are three important techniques that managers can use to promote creativity in
group decision-making situations. Discuss any two of these techniques and explain how each
of the techniques that you have selected could be used by a manager in a specific business
situation of your choosing to promote a more creative decision by the group.
108. Briefly define "management" and "entrepreneurship". How do they differ? Why do
entrepreneurs often have difficulty in managing?
109. Explain three ways that organizations can promote organizational intrapreneurship.
7-25
1. (p. 227) Managers make decisions whenever they are engaged in planning, organizing,
leading, or controlling.
TRUE
7-26
5. (p. 230) A manager who makes a decision based on his judgment is using a less rational
process than a manager who makes a decision using her intuition.
FALSE
6. (p. 230) The likelihood of a manager making an error in judgment is much greater in
programmed decision-making than in nonprogrammed decision-making.
FALSE
7. (p. 230) The classical decision making model assumes that managers have all of the
information they need in order to make the optimum decision.
TRUE
7-27
8. (p. 232) The classical decision making model is prescriptive in the sense that it specifies how
decisions should be made.
TRUE
9. (p. 232) March and Simon's Administrative Model is consistent with the classical model of
decision-making.
FALSE
10. (p. 233) According to the Administrative Model, managers can never have complete
information when they are trying to make a nonprogrammed decision because the complete
range of decision-making alternatives is unknowable.
TRUE
11. (p. 233) When managers know the possible outcomes of a decision and can assign
probabilities to each of these outcomes in terms of their likelihood of occurrence, a situation
called risk occurs.
TRUE
7-28
12. (p. 233) When the outcomes of decision alternatives are known and their probabilities can be
determined, a situation of uncertainty exists.
FALSE
13. (p. 235) When a manager chooses an acceptable alternative instead of the optimum
alternative, we say that a satisficing decision has occurred.
TRUE
14. (p. 235) According to March and Simon, managerial decision making is frequently more of a
science than an art, especially when nonprogrammed decisions are involved.
FALSE
15. (p. 237) Managers can be reactive in recognizing the need for a decision, but not proactive.
FALSE
7-29
16. (p. 238) A common reason for poor decisions is that managers fail to specify the criteria that
are important for making that particular decision.
TRUE
17. (p. 238) When managers are concerned with the legality of a decision, they are concerned
with the practicality of the decision.
FALSE
18. (p. 241) Rules of thumb that simplify the decision making process are a form of systematic
error.
FALSE
19. (p. 241) Errors that managers make over and over again without learning from their mistakes
are known as heuristics.
FALSE
7-30
20. (p. 242) When a manager generalizes inappropriately from a small sample to a new situation
and makes a poor decision as a result, representativeness bias has occurred.
TRUE
21. (p. 242) Pat, a manager, committed a large amount of resources to a potential new product.
Later, Pat received feedback that the product would not succeed but continued to commit
major resources in an attempt to save the project from ruin. Escalating commitment has
occurred on Pat's part.
TRUE
22. (p. 242) A member of a group challenges the decision that is being made by the group in an
attempt to make the group think carefully about the pros and cons of a particular alternative.
We say that this member of the group is playing the role of the devil's advocate.
TRUE
23. (p. 243) When the members of a group try hard to agree, even when it is done without
accurately assessing the information available to the group, we say that groupthink has
occurred.
TRUE
7-31
24. (p. 245) Devil's advocacy and dialectical inquiry can both be used to help reverse the effects
of groupthink in group decision making.
TRUE
25. (p. 245) Dialectical inquiry is easier to use than devil's advocacy to blunt the effects of
groupthink in group decision making.
FALSE
26. (p. 245) The ability of a decision maker to discover novel ideas that lead to feasible
alternatives in decision-making is known as creativity.
TRUE
27. (p. 245) According to Senge's concept of the learning organization, team learning is less
important than individual learning when trying to increase organizational learning.
FALSE
7-32
28. (p. 247) Group creativity can be increased by using brainstorming techniques.
TRUE
29. (p. 247) When a group meets face-to-face and attempts to generate a wide variety of
alternatives as possible solutions to a problem without criticizing them until all of the
alternatives have been presented, brainstorming has occurred.
TRUE
30. (p. 247) In brainstorming sessions, the fewer alternatives presented, the better the
brainstorming session.
FALSE
7-33
34. (p. 251) The higher the level of intrapreneurship in a firm, the higher will be the level of
learning and innovation.
TRUE
35. (p. 227) The process by which managers respond to opportunities and threats facing their
organization by analyzing options and taking actions is known as:
A. Brainstorming
B. Intuition
C. Decision making
D. Bounded rationality
E. Heuristics
7-34
36. (p. 228) Managers make decisions when they are involved in which managerial function?
A. Planning
B. Controlling
C. Leading
D. Organizing
E. All of the above
37. (p. 228) Decisions that have been made many times in the past and for which managers have
rules and guidelines as to how to make similar decisions in the future are known as:
A. Nonprogrammed decisions
B. Heuristic decisions
C. Programmed decisions
D. Intuitive decisions
E. Creative decisions
38. (p. 228) Mary schedules a meeting with Clarise, a subordinate, because Clarise's
performance has dropped below a certain level. What type of decision does this represent?
A. Intuition
B. Groupthink
C. Programmed
D. Nonprogrammed
E. Satisficing
7-35
39. (p. 228) Jose, a plant supervisor, orders machine screws whenever his inventory of screws
falls below two cases. This is an example of which type of decision?
A. Intuition
B. Satisficing
C. Nonprogrammed
D. Programmed
E. Groupthink
40. (p. 228) Barbara, a school superintendent, asks the local school board for permission to hire
an additional teacher whenever the student enrollment at a certain grade level within a school
increases by 35 students beyond capacity. This is an example of which type of decision?
A. Programmed
B. Groupthink
C. Nonprogrammed
D. Intuition
E. Satisficing
41. (p. 228) Peggy, a plant foreman, asks the plant superintendent to hire an additional worker
whenever overtime hours for the previous month increase by more than 15 percent over the
headcount. This is an example of which type of decision?
A. Intuition
B. Groupthink
C. Satisficing
D. Programmed
E. Nonprogrammed
7-36
42. (p. 228) When an organization's accounting department sends out a bill to a new customer,
what type of decision does this represent?
A. Programmed
B. Nonprogrammed
C. Intuition
D. Groupthink
E. Bounded rationality
43. (p. 228) Achmed, an office manager, orders photocopy paper whenever the number of cases
of paper in the storeroom falls below a certain amount. This represents which type of
decision?
A. Satisficing
B. Programmed
C. Intuition
D. Nonprogrammed
E. None of the above
44. (p. 230) Nonroutine decisions made in response to novel situations in business are known as:
A. Intuitive decisions
B. Creative decisions
C. Programmed decisions
D. Heuristic decisions
E. Nonprogrammed decisions
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45. (p. 230) When a manager makes a good decision based on a "gut feeling," this is known as:
A. A programmed decision
B. A nonprogrammed decision
C. A heuristic decision
D. An intuitive decision
E. The illusion of control
46. (p. 230) The manager's ability to develop a sensible opinion based on the way that she
evaluates the importance of the available information is known as:
A. Intuition
B. Satisficing
C. Heuristics
D. Judgment
E. Creativity
47. (p. 230) Acme Explosives is trying to decide whether or not to launch nationally a new
product that this organization has never sold previously. This represents which type of
decision for the organization?
A. Programmed
B. Intuition
C. Groupthink
D. Nonprogrammed
E. Satisficing
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48. (p. 230) WashUrCar, which operates five car washes, is attempting to decide whether or not
it should purchase a new type of drying equipment. This represents which type of decision for
the organization?
A. Programmed
B. Nonprogrammed
C. Groupthink
D. Intuition
E. Satisficing
49. (p. 230) Jersey Office Supply Company is attempting to decide whether or not to launch a
new $10 million advertising campaign for a service where office supplies are guaranteed to be
delivered to customers locations twice a day. Sales for this service have been lagging well
below what was projected. This represents which type of decision for the organization?
A. Groupthink
B. Intuition
C. Programmed
D. Nonprogrammed
E. Satisficing
50. (p. 230) Peck's Frozen Custard has been focusing on a target market located in northwestern
Virginia. They are attempting to decide whether to expand stores to the Washington, D.C.
metropolitan area. What type of decision is this?
A. Intuition
B. Nonprogammed
C. Groupthink
D. Satisficing
E. Programmed
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51. (p. 232) When we say that the classical model of decision-making specifies how managers
should make decisions, this is another way of saying that this model is:
A. Heuristic
B. Prescriptive
C. Incomplete
D. Intuitive
E. Satisficing
52. (p. 232) In the classical model of decision-making, the most appropriate decision given the
likely future consequences to the organization is known as the ____________ decision.
A. Intuitive
B. Creative
C. Heuristic
D. Obvious
E. Optimum
53. (p. 233) All but one of the following are important aspects of the administrative model of
decision making. Which one?
A. Satisficing
B. Incomplete information
C. Bounded rationality
D. Brainstorming
E. None of the above
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54. (p. 233) In the administrative model of decision making, when the number of possible
alternatives to a decision is so large that the manager cannot possibly evaluate all of them
before making a decision, this is called:
A. Satisficing
B. Bounded rationality
C. Brainstorming
D. Devil's advocacy
E. Optimizing
55. (p. 233) According to the administrative model of decision making, if managers cannot
possibly specify all of the possible alternatives to a decision, this is the result of:
A. Incomplete information
B. Bounded rationality
C. An optimum decision
D. Brainstorming
E. None of the above
56. (p. 233) Managers in biotechnology know that new drugs have a 10% chance of passing
advanced clinical trials. This is an example of:
A. Risk
B. Uncertainty
C. Bounded rationality
D. Incomplete information
E. Satisficing
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57. (p. 233) When managers know the possible outcomes of a decision and can assign
probabilities to each of these outcomes in terms of their likelihood of occurrence in the future,
this is known as:
A. Uncertainty
B. Certainty
C. Risk
D. Bounded rationality
E. Dialectical inquiry
58. (p. 233) An organization introduces a new product unlike any previously on the market, for
which it cannot estimate the probability of success. This condition is called:
A. Risk
B. Uncertainty
C. Bounded rationality
D. Incomplete information
E. Satisficing
59. (p. 233) When managers cannot assign probabilities of future occurrence to possible
alternatives to a decision, this is known as:
A. Certainty
B. Risk
C. Bounded rationality
D. Uncertainty
E. Dialectical inquiry
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60. (p. 233) When uncertainty exists, the probabilities of alternative outcomes __________ be
determined and the future outcomes are _________.
A. Can; known
B. Cannot; known
C. Can; unknown
D. Cannot; unknown
E. None of the above
61. (p. 235) Eileen, a college professor, is attempting to choose the best textbook for an
upcoming course. After reviewing ten of the twenty possible choices, she runs out of time,
and chooses one. What has she done?
A. Optimized
B. Brainstormed
C. Bounded her rationality
D. Satisficed
E. Used devil's advocacy
Satisficing is searching for and choosing an acceptable response, rather than trying to make
the best decision.
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62. (p. 235) When the meaning of the information available to a manager is unclear and can be
interpreted in several ways, the information is:
A. Certain
B. Ambiguous
C. Bounded
D. Irrational
E. All of the above
63. (p. 235) When the information available to a manager is incomplete because the manager
must make a decision quickly, this is known as:
A. Bounded rationality
B. Devil's advocacy
C. Dialectical inquiry
D. A time constraint
E. An information cost
64. (p. 235) Chris, the fleet manager for an office supply company, has limited staff and between
himself and them, they don't have enough time to evaluate all possible alternative new
delivery trucks the company might buy. Chris is suffering from:
A. Bounded irrationality
B. A time constraint
C. An information cost
D. Dialectical inquiry
E. Devil's advocacy
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65. (p. 235) A manager considers a limited sample of the potential alternative solutions for a
problem and selects one that is acceptable instead of attempting to select the optimum
solution. This type of decision is called:
A. Programmed
B. Intuition
C. Certainty
D. Satisficing
E. Heuristics
66. (p. 235) Paramount Kitchen Countertops decides to ask three advertising agencies to pitch a
proposal to handle the organization's business, instead of asking all of the advertising agencies
in the city where this organization's headquarters are located to pitch the account. What type
of decision does this represent?
A. Programmed
B. Nonprogrammed
C. Satisficing
D. Certainty
E. Illusion of control
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67. (p. 235) The purchasing manager for Ford Motor Co. decides to call three suppliers of
automobile windshields to ask for bids on an order for windshields for a new Ford car, instead
of calling fifty possible windshield suppliers for such a bid. What type of decision does this
represent for the purchasing manager?
A. Nonprogrammed
B. Illusion of control
C. Certainty
D. Programmed
E. Satisficing
68. (p. 236) In August of 1985, Sun Microsystems had to decide whether to go ahead with the
launch of its new Canera workstation computer. This represented:
A. A programmed decision under uncertainty
B. A programmed decision under risk
C. A nonprogrammed decision under uncertainty
D. A nonprogrammed decision under risk
E. None of the above
69. (p. 236) Based on the work of March & Simon's Administrative Model, the first step in the
managerial decision-making process is to:
A. Choose among alternatives.
B. Assess alternatives.
C. Implement the chosen alternative.
D. Recognize the need for a decision.
E. Generate alternatives.
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70. (p. 238) In assessing alternatives for a decision, managers typically use all but one of the
following criteria. Which one?
A. Legality
B. Dialectical inquiry
C. Economic feasibility
D. Practicality
E. Ethicalness
71. (p. 238) A marketing manager wants to budget the advertising for a new product launch. She
is trying to determine the amount of money that her company can afford to spend on
advertising this new product. On which criterion of decision-making is this marketing
manager focusing?
A. Legality
B. Ethicalness
C. Economic feasibility
D. Practicality
E. None of the above
72. (p. 238) Christina performs a financial analysis of each alternative in order to determine
which one is most likely to impact the organization's profitability. She is focusing on which
criterion for decision-making?
A. Practicality
B. Ethicalness
C. Economic feasibility
D. Dialectical inquiry
E. Legality
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73. (p. 238) Dan, a manager is attempting to determine whether he has both the capability and
the resources to implement one of the possible alternative solutions to a problem. Dan is
focusing on which criterion for decision-making?
A. Practicality
B. Ethicalness
C. Legality
D. Economic feasibility
E. Dialectical inquiry
74. (p. 238) Dale, a manager, is assessing possible alternatives for the solution of a problem. As
Dale does so, he attempts to determine if a possible alternative will threaten other company
projects. On which criterion for decision-making is Dale focusing?
A. Economic feasibility
B. Practicality
C. Legality
D. Ethicalness
E. None of the above
75. (p. 238) Pat, a manager, is assessing possible alternatives for the solution of a problem. Pat
performs a cost-benefit analysis of several alternatives in order to determine the net financial
payoff of each alternative. On which criterion for decision-making is Pat focusing?
A. Economic feasibility
B. Practicality
C. Ethicalness
D. Legality
E. Dialectical inquiry
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76. (p. 239) When managers who were responsible for the decision to launch the Challenger
space shuttle were attempting to balance the conflicting demands for ensuring the safety of
the astronauts with the desire to obtain future funding for the U.S. space program, on which
decision-making criterion were these managers focusing?
A. Practicality
B. Legality
C. Ethicalness
D. Economic feasibility
E. None of the above
77. (p. 239) The explosion of the space shuttle Challenger is an example of poor managerial
decision-making where managers neglected the criterion of:
A. Ethicalness
B. Practicality
C. Legality
D. Economic feasibility
E. Devil's advocacy
78. (p. 240) Based on March and Simon's Administrative Model, the last step in the managerial
decision-making process is to:
A. Generate alternatives
B. Learn from feedback
C. Recognize the need for a decision
D. Implement the chosen alternative
E. Choose among alternatives
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79. (p. 241) In managerial decision-making, "rules of thumb" that are useful to managers
because they simplify the decision-making process are called:
A. Dialectical inquires
B. Decision biases
C. Heuristics
D. NGT's
E. Delphi's
80. (p. 241) Mistakes in decision-making that some managers make over and over again without
learning from their mistakes are known as:
A. Dialectical errors
B. Devil's errors
C. Intuition
D. Groupthink
E. Systematic errors
81. (p. 241) When a manager persists in a belief even when she is given information that
indicates that this belief is incorrect, this is called:
A. Devil's advocacy
B. Groupthink
C. Prior hypothesis bias
D. Dialectical inquiry
E. A satisficing
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82. (p. 242) When a manager makes a decision based on a generalization from a very small
sample of information, this is known as:
A. Dialectical inquiry
B. Systematic errors
C. Devil's advocacy
D. Representative bias
E. The illusion of control
83. (p. 242) The tendency to overestimate one's own ability to influence actions and events is
called:
A. Escalating commitment
B. Illusion of control
C. Prior hypothesis bias
D. Representativeness bias
E. Dialectical inquiry
84. (p. 242) When an organization has committed significant resources to a project and the
project manager continues to invest the organization's resources in this project even when he
receives information that the project is badly failing, this is called:
A. Systematic errors
B. Devil's advocacy
C. Dialectical inquiry
D. Heuristics
E. Escalating commitment
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85. (p. 242) Escalating commitment to a managerial decision could ignore evidence that the
project is:
A. Impractical
B. Illegal
C. Unethical
D. Uneconomical
E. All of the above
86. (p. 242) A manufacturing organization in a declining industry decides that in order to
compete effectively, it should invest heavily in products it already produces. This could be an
example of:
A. Satisficing
B. Programmed decision making
C. Escalation of commitment
D. Representativeness bias
E. Prior hypothesis bias
Escalation of commitment is bias resulting from the tendency to overestimate one's own
ability to control activities and events.
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87. (p. 243) Members of a group strive so hard to agree on an important decision that they ignore
information that is counter to the evidence supporting the point-of-view that they are
considering adopting. This is known as:
A. Dialectical inquiry
B. Devil's advocacy
C. Groupthink
D. Intuition
E. Representative bias
88. (p. 244) A member of a group challenges the decision toward which the group is leaning so
that the group considers carefully all of the unacceptable possible outcomes of the alternative
that the group is considering. This is known as:
A. Dialectical inquiry
B. Devil's advocacy
C. Groupthink
D. Programmed decision-making
E. A satisficing decision
89. (p. 244) Two separate groups of managers are given a problem to solve, and then each group
presents its proposed solution to top management in an attempt to determine the best course of
action. This process is called:
A. Devil's advocacy
B. Groupthink
C. Dialectical inquiry
D. The classical decision-making model
E. A satisficing decision
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90. (p. 245) The process through which managers attempt to improve the ability of subordinates
to understand and to manage the organization is known as:
A. Dialectical inquiry
B. Devil's advocacy
C. Groupthink
D. Organizational learning
E. Intuition
91. (p. 245) An organization in which managers do all that they can to maximize the ability of
subordinates to think creatively so as to maximize the potential for organizational learning is
called:
A. A learning organization
B. A dialectical organization
C. A groupthink organization
D. An intuitive organization
E. A heuristics organization
92. (p. 245) In managerial decision-making, the ability of a manager to discover novel ideas as
possible alternative courses of action for the organization to use in solving a particular
problem is known as:
A. Groupthink
B. Dialectical inquiry
C. Intuition
D. Creativity
E. The illusion of control
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93. (p. 247) A group of managers meets face-to-face and generates and debates a wide variety of
alternatives from which to make a decision. This is called:
A. Delphi technique
B. Dialectical inquiry
C. Brainstorming
D. Nominal group technique
E. Programmed decision making
94. (p. 247-248) After hearing one member describe a problem to be addressed, all members of a
group first write down ideas and solutions. After this, everyone shares those suggestions
without criticism. The group, one by one, clarified, and critiqued then discusses the
alternatives. Finally, each member ranks all the alternatives, and the highest-ranking
alternative is chosen. This process is called:
A. Delphi technique
B. Dialectical inquiry
C. Brainstorming
D. Nominal group technique
E. Programmed decision making
95. (p. 248) A group decision-making method that can be done by email is:
A. The Delphi technique
B. Dialectical inquiry
C. Brainstorming
D. Nominal group technique
E. The Alpha protocol
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96. (p. 250) Which of the following is NOT a likely characteristic of an entrepreneur?
A. Open to experience
B. High self-esteem
C. Need for achievement
D. Need for power
E. Internal locus of control
97. (p. 251) In a ______________, a group of intrapreneurs is deliberately separated from the
normal operation of the organization.
A. Project team
B. Skunkworks
C. Product champion team
D. Product development committee
E. Task force
Essay Questions
98. (p. 228-230) Compare and contrast programmed and nonprogrammed decision-making in
organizations. Give two realistic business examples of each of these two types of decision-
making.
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99. (p. 232) Discuss the assumptions that underlie the classical model of decision-making. What
are the implications of this model?
The assumptions that underlie the classical model of decision making are that (1) managers
can generate a complete list of all alternatives and their consequences; (2) they have access to
all the information they need to make the optimum decision; (3) they can identify and
describe their own preferences and values; and (4) on the basis of this, they can rank
alternatives and choose the optimal solution.
100. (p. 232-235) March and Simon developed three important concepts in their administrative
model of decision-making. Discuss these three concepts and explain how they would apply to
a realistic business decision situation of your choosing.
The three important concepts in this model are bounded rationality, incomplete information,
and satisficing decisions. March and Simon believed that managers do not have the mental
ability to absorb and evaluate all of the possible relevant information for a complex decision.
101. (p. 236-240) Researchers have identified a six-step model that can be used by managers who
are faced with an important decision. Discuss these steps as they would apply to an important
and realistic business situation of your choosing.
The six steps are: (1) Recognize the need for a decision; (2) Generate alternatives; (3) Assess
alternatives; (4) Choose among alternatives; (5) Implement the chosen alternative; (6) Learn
from feedback.
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102. (p. 238-239) One of the main reasons that managers make poor decisions is that they fail to
specify in advance the decision-making criteria that they will use when making the decision.
Discuss the four criteria that are generally used by managers in evaluating the advantages and
disadvantages of alternative courses of action in an important decision-making situation.
Managers generally make decisions based on the legality of the alternative so that they are not
breaking any laws, the ethicalness of the decision in terms of whether or not it will harm any
of the stakeholders, the economic feasibility of the alternative in terms of the cost-benefit
analysis, and in terms of the practicality of the alternative as to whether the organization can
actually implement the alternative if it is selected.
103. (p. 241-243) Managers sometimes make poor decisions because of cognitive bias in their
decision-making process. Discuss three of the four sources of bias that can adversely affect
the ability of managers to make a good decision, and illustrate each of them with a realistic
business decision-making situation.
Managers can create bias in their decision-making from prior hypotheses, representativeness,
the illusion of control, and escalating commitment.
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104. (p. 243-245) Identify the advantages and disadvantages of group decision-making. Describe
at least two ways that groups can overcome some disadvantages, using an example of a group
of students doing a course project.
The advantages include (1) less likely to be biased and make judgment errors; (2) can draw on
combined knowledge and skills of all group members; (3) can process more information; (4)
can correct each others' errors; and (5) groups increase the probability of implementation.
Disadvantages include (1) they generally take longer; (2) gaining agreement may be difficult;
(3) groupthink.
105. (p. 244-245) Managers can use a variety of techniques in group decision-making situations to
counteract situations in which the group is suffering from groupthink or cognitive biases. Two
such techniques have been shown to be especially useful in such situations. Discuss these two
techniques and explain how they would be used in a group decision-making situation of your
choosing.
The two techniques that have been found to be most useful in such situations are devil's
advocacy and dialectical inquiry. The decision-making situation selected by the student should
explain how these techniques would be used to avoid groupthink and cognitive biases.
106. (p. 245-246) Peter Senge has identified five principles that can be used by an organization to
create a "learning organization." Discuss any three of these principles and explain how they
could be applied to an organization in order to create this type of organization.
Senge's five principles are personal mastery, complex mental models, team learning, building
a shared vision, and systems thinking.
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107. (p. 246-248) There are three important techniques that managers can use to promote
creativity in group decision-making situations. Discuss any two of these techniques and
explain how each of the techniques that you have selected could be used by a manager in a
specific business situation of your choosing to promote a more creative decision by the
group.
The three techniques are nominal group technique, brainstorming, and Delphi method.
108. (p. 250-251) Briefly define "management" and "entrepreneurship". How do they differ? Why
do entrepreneurs often have difficulty in managing?
Management encompasses all the decisions involved in planning, organizing, leading, and
controlling resources. Entrepreneurship is noticing an opportunity to satisfy a customer need
and then deciding how to find and use resources to make a product that satisfies that need.
109. (p. 251-252) Explain three ways that organizations can promote organizational
intrapreneurship.
Organizations can:
1. Encourage product champions
2. Set up skunkworks
3. Provide rewards for innovation
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