SCENARIO 12-1 You Are Making a Decision Whether to Discontinue

question 19

Multiple Choice

SCENARIO 12-1 You are making a decision whether to discontinue research on a new drug.This new drug would save lives, but it is uncertain whether it can be developed within a reasonable time frame and at a reasonable cost.Your firm has already spent a small fortune on this drug.You have gathered so much information in preparation for making the decision that you are unable to sort the good information from the superfluous.
You decide to spend more money on the project, even though you believe it to be improbable that you will succeed.You are guilty of

• A)availability heuristic.
• B)representative heuristic.
• C)escalation of commitment.
• D)satisficing.
• E)ignoring the base rate.

Understand human performance across various thinking tasks.

Explore the concept of incubation in creative problem-solving.

Analyze factors contributing to creativity and innovation.

Distinguish between expert and novice approaches in skill-specific domains, like chess.

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Definitions:

Economics

The social science that studies the production, distribution, and consumption of goods and services.

Total Utility

The total satisfaction or pleasure a person derives from consuming a specific quantity of goods or services.

Risk-Averse

Describes individuals who choose to reduce risk when that reduction leaves the expected value of their income or wealth unchanged.

Income Curve

The income curve, in economics, typically relates to a graphical representation showing how a change in income affects consumption or purchasing patterns of individuals or households.