BUILDING DECISION MAKING SKILLS

This is a required test of your judgment and reasoning abilities. It is not graded and course credit is earned simply by attempting the test and confirming this through the e-mail form at the end of the test. The purpose of a self-test is to provide feedback to you on mastery. Both correct and incorrect responses are prompted with the bias that is illustrated and with the correct manner of reasoning. There are 15 questions. Follow the information at the bottom of the page for credit. Learn from this test what bias you bring to your decision-making and begin to understand how to correct for this error.

1. The following are two groups of five firms. Of these groups, which contains firms that were ranked higher in Fortune magazine's 1999 list of the 500 largest U.S. based firms base on sales:

Group A: General Mills, Nike, Colgate-Palmolive, Coca-Cola, Eastman Kodak
Group B: TIAA-CREF, ENROE, SBC Communications, United Technologies, Ingram Micro


2. The best student in an introductory MBA class writes poetry and is rather shy and small in statute. The student's undergraduate major was:

A. Chinese studies
B. Psychology


3. Which is riskier:

A. driving a car on a 400 mile trip?
B. flying on a 400 mile trip?


4. Are there more words in the English language

A. that start with an r?
B. for which r is the third letter?


5. Marcus is finishing his MBA at a prestigious university. He has an interest in entertainment and at one time considered a career as a musician. Is Marcus more likely to take a job:

A. in entertainment management?
B. with a management consulting firm?


6. In 1986, two research groups sampled consumers on the driving performance of the Dodge Colt versus the Plymouth Champ in a blind road test; that is, the consumers did not know when they were driving the Colt or the Champ. In fact, both of these cars were identical; only the marking varied.
One research group (A) sampled 66 consumers each day for 60 days (a large number of days to control for weather and other variables), while the other group (B) sampled 22 customers each day for 50 days.
Which consumer group observed more days in which 60% or more of the customers tested preferred the Dodge Colt:

A. Group A?
B. Group B?


7. A town is served by two hospitals. In the larger hospital about 45 babies are born each day, and in the smaller hospital about 15 babies are born each day. As you know, about 50% of all babies are boys, although the percentage may vary daily. For a period of one year, each hospital recorded the days on which more than 60% of the babies born were boys. Which hospital do you think recorded more such days?

A. Larger hospital
B. Smaller hospital
C. About the same


8. You are about to hire a new central-region sales director for the fifth time this year. You predict that the next director should work out reasonably well, since the last four were "lemons", and the odds favor hiring at least one good sales director in five tries. This thinking is

A. Correct
B. Incorrect


9. Your ambition has been to be a self employed entrepreneur - no boss; no responsibility except to yourself; an opportunity to build the kind of business you have always imagined. Having invested $50,000 of your own money and $50,000 of a small business loan, after twelve months you now find that things are not working out. Sales have not materialized in the volume that was forecast and costs have exceeded your original estimate. You estimate that if you borrow $50,000 more you can make it another twelve months. You hope to turn things around in that time. Do you borrow the additional $50,000? YES NO

YES
NO


10. There is a Fortune Teller who, it is claimed, is particularly accurate with favorable stock market predictions which means a "bull" market with stock prices increasing. Whenever the Fortune Teller predicts a rise in the market, the market always rises. You are to verify this claim with a little experiment.
To demonstrate that the cards used by the Fortune Teller are honest, you are shown the 4 cards used for predictions, front and back:

The Fortune Teller lays out the cards and predicts: "There will be a favorable rise in the market." To test that The Fortune Teller can predict a rise in the market, you ask the Fortune Teller to lay out the four cards on the table: two cards up and two cards down. If you turn over either CARD 1 or CARD 2, you will reveal the actual outcome or state of the market - "bull" or "bear". If you turn over either CARD 3 or CARD 4, you will reveal the possible market predictions - "favorable" or "unfavorable". It is possible to verify the Fortune Teller's claim by turning over just one of the card(s). Given that the Fortune Teller has predicted a rise in the market, which card would you turn over for the evidence that you need to test belief in the prophesies of the Fortune Teller?
 Cards 1 and 2 are laid out with the PREDICTIONS face up.

 Cards 3 and 4 are laid out with the OUTCOMES face up.

 

 

 

 
Turn over Card 1 Turn over Card 2 Turn over Card 3 Turn over Card 4

11. Imagine that your current job gives you 30 vacation days a year. As a reward for your excellent work, you manager gives you a 14 day vacation bonus. You have the following choices:

A. take 14 days off this year
B. take 7 days off this year and 7 days off next year

12. Imagine that your current job gives you 30 vacation days a year. As a reward for your excellent work your manager gives you a 14 day vacation bonus. You have the following choices:

A. take 44 days off this year and 30 days off next year
B. take 37 days off this year and 37 days off next year

13. Assume that you are planning to clean your apartment/house/condominium next Saturday morning for four hours. What is the MOST that you would pay someone to do the same amount of cleaning for you, so that you could relax for those four hours?

A. less than $5 an hour
B. $5-10 an hour
C. $10-20 an hour
D. more than $20 an hour

14. Assume that you were planning to relax next Saturday morning. What is the LEAST that you would accept to clean an apartment/house/condominium for four hours?

A. less than $5 an hour
B. $5-10 an hour
C. $10-20 an hour
D. more than $20 an hour

15. Imagine that you face the following pair of decisions. First examine both decisions , and then choose the option that you prefer.

I. Choose between:

A. A sure gain of $240.
B. A 25% chance to gain $1000, and a 75% chance to gain nothing.

II. Choose between:

C. A. A sure loss of $750.
D. A 75% chance to lose $1000, and a 25% chance to lose nothing.

III. Choose between:

E. A 25% chance to win $240, and a 75% chance to lose $760.
F. A 25% chance to win $250, and a 75% chance to lose $750.


I COMPLETED THE "BUILDING DECISION MAKING SKILLS" ASSIGNMENT

This exercise is required, but you are on the 'honor system'. You now need to confirm that you have completed this required activity by e-mailing a message to Dr. Makamson. When the message is received, your points for accomplishing the activity will be added to your grade. There is no other scoring. Points are provided for simply completing the assignment. To receive a confirmation, your email address must be valid.

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