Decision-Making Biases and Concepts

What is an opportunity cost?

• The money you spend on a choice.

• The value of the next best alternative you give up when making a choice.

• The total cost of all possible choices.

• The time it takes to make a decision.

Why might someone feel good about buying an item at a discount, even if the original price was random?

• They saved a lot of money.

• The item was of high quality.

• They are influenced by the initial higher price, making the discounted price seem better.

• They needed the item urgently.

What is the purpose of using a weighted scorecard when making a big decision?

• To quickly choose the cheapest option.

• To assign more importance to factors that matter most to you.

• To avoid making any decision at all.

• To only consider the negative aspects of each choice.

What is confirmation bias?

• The tendency to seek out information that supports your existing beliefs.

• The ability to make quick decisions without much thought.

• The act of changing your opinion based on new evidence.

• The process of comparing all possible options equally.

What is "motivated blindness" in business decisions?

• When a company intentionally hides its financial records from investors.

• When someone avoids asking important questions or ignores unethical behavior because it benefits them.

• When employees are motivated to work harder by being ranked below average.

• When a business decision leads to unexpected losses due to poor planning.

How did "motivated blindness" contribute to the Enron scandal?

• Employees were encouraged to leave if they were not performing well, leading to a lack of skilled workers.

• Executives were unaware of the criminal conduct happening within the company.

• Employees ignored fraudulent activities and failed to question unethical projects because of the company's incentive structure.

• The company invested too much money in risky energy projects that ultimately failed.

Which of the following best describes the "sunk cost fallacy"?

• The tendency to invest more time or money into a failing project because of past investments.

• The belief that past successes guarantee future positive outcomes.

• The act of ignoring potential future benefits in favor of immediate gains.

• The error of underestimating the time and resources needed to complete a project.

What is the "planning fallacy"?

• Overestimating the amount of money that can be saved on a project.

• Underestimating the time and resources required to complete a task.

• The tendency to abandon a project too early, before it has a chance to succeed.

• The mistake of not planning for unexpected problems or delays.