Decision-Making Biases (Scenario) Frank Is President of Mega Manufacturing, a Canadian Company That

question 57

Multiple Choice

Decision-making Biases (Scenario)
Frank is president of Mega Manufacturing, a Canadian company that makes automobile parts. Sales and profits are down sharply this quarter, and Frank needs to analyze the series of events that have led to the poor performance. Frank begins by reviewing his recent interactions with Mike, the vice-president of sales.
-Frank reluctantly agreed to authorize Mike's request for additional funds to pursue the Japanese car maker,despite some ongoing concerns he has had about how this contract could impact his current agreements with three U.S.car companies.If Mega were to win the Japanese business,they would not have sufficient production capacity to meet all their contract obligations.Frank's decision demonstrates which of the following?

• A)confirmation bias
• B)hindsight bias
• C)overconfidence bias
• D)framing bias

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Definitions:

Federal Funds Rate

The interest rate at which banks lend reserves to each other overnight, a key tool of monetary policy used by the Federal Reserve to influence the economy.

Buying Bonds

The act of purchasing debt securities issued by governments or corporations, which pay interest over a fixed period.

Money Supply

The aggregate sum of funds present in an economy at a given moment, encompassing cash, bank deposits, and various readily accessible assets.

Interest Rate

The percentage of a sum of money charged for its use, often expressed as an annual percentage.