Managerial Decision-Making Under Uncertainty

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1. 1

   Which situation most clearly requires a nonprogrammed managerial decision?

   A Responding to an unfamiliar competitor using a disruptive business model B Reordering inventory when stock reaches a predefined minimum C Approving a routine expense that complies with company policy
2. 2

   Using the decision tree shown, what is the expected monetary value of launching the product?

   

   A $40,000 B $60,000 C $90,000
3. 3

   Under the maximin decision criterion, which alternative should a manager select?

   A The alternative with the largest possible payoff B The alternative with the smallest maximum regret C The alternative with the best worst-case payoff
4. 4

   A company has already spent $80,000 researching a product that now appears unprofitable. How should that expenditure be treated when deciding whether to continue?

   A As a benefit that favors continuing the project B As a sunk cost that should not affect the decision C As an avoidable future cost of cancellation
5. 5

   A manager seeks evidence supporting a preferred plan while dismissing credible contrary data. Which bias is most evident?

   A Confirmation bias B Availability bias C Anchoring bias
6. 6

   In the decision-tree diagram, what does the highlighted circular node represent?

   

   A A terminal outcome B A managerial decision point C An uncertain event or chance node
7. 7

   What is the main purpose of sensitivity analysis in a managerial decision model?

   A To test how changes in assumptions affect the recommended decision B To guarantee that the highest forecast payoff will occur C To remove uncertainty by replacing estimates with historical averages
8. 8

   Using the payoff matrix shown, which alternative is selected by the minimax regret criterion?

   

   A Alternative A B Alternative B C Alternative C
9. 9

   A supplier has a 10% prior probability of delivering defective material. An alert detects defective deliveries 80% of the time but also activates for 20% of acceptable deliveries. If an alert occurs, approximately what is the probability that the delivery is defective?

   

   A 10% B 20% C 31%
10. 10

    Using the payoff table shown and equal probabilities for strong and weak demand, what is the expected value of perfect information?

    

    A $70,000 B $100,000 C $120,000
11. 11

    Which practice is most effective for reducing groupthink during a management team's decision process?

    A Ask the senior leader to announce a preferred choice before discussion B Assign a devil's advocate and actively invite dissenting evidence C Require rapid consensus before evaluating competing alternatives