Herbert Simon Noted That Managers Generally Fail to Make Rational

question 71

Multiple Choice

Herbert Simon noted that managers generally fail to make rational decisions because they are limited by their own values,skills,habits,and unconscious reflexes as well as by incomplete information.What name did Simon give this phenomenon?

• A) Decision framing
• B) Satisficing
• C) Escalation of commitment
• D) Innovation
• E) Bounded rationality

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Definitions:

Financial Break-Even

The point at which total revenues are equal to total fixed and variable costs, resulting in a net income of zero.

Soft Rationing

Internal limitations set by a company on the amount of funds allocated for new investments or projects.

Operating Leverage

A measure of how revenue growth translates into growth in operating income, demonstrating the proportion of fixed versus variable costs a company has.

Fixed Costs

Expenses that remain constant regardless of how much is produced or sold, including rent, salaries, and insurance costs.