According to Simon's Theory of Bounded Rationality, Why Do Humans

question 103

Multiple Choice

According to Simon's theory of bounded rationality, why do humans tend to make irrational decisions?

• A)We make decisions more difficult than they need to be.
• B)We use simple strategies and focus on limited information.
• C)We have logic systems that are only useful in natural environments.
• D)We are too guided by our emotions.

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Definitions:

Make or Buy

A decision-making process used by companies to determine whether to produce goods in-house or purchase them from an external supplier.

Incremental Costs

Costs that change depending on the level of production or an alternative course of action.

Additional Revenues

Extra income generated from sources outside of the company's main business operations.

Sunk Cost

Costs that have already been incurred and cannot be recovered or reversed.