Final answer:
The classical model of decision-making is prescriptive and provides guidelines on how managers should make decisions with an idealized assumption of complete rationality and full information. It contrasts with descriptive models by not necessarily describing real-world behavior, where decisions are often irrational or inconsistent.
Step-by-step explanation:
When we say that the classical model of decision-making specifies how managers should make decisions, we are referring to the prescriptive nature of the model. The classical or economic model of decision-making provides an idealized framework that outlines how decisions should be made, under the assumption of complete rationality, full information, and a consistent value system aimed at maximizing utility or profit. This is in contrast to descriptive models, which attempt to explain how decisions are made, acknowledging that human behavior often deviates from pure rationality.
Traditional economic models assume that individuals, firms, and governments engage in rational decision-making. These models suggest that all available information is considered and that choices are made consistently to maximize the decision-maker's self-interest. However, in reality, we observe irrational behaviors, where people make inconsistent decisions that may not always be in their best interest or use all available information to make the most informed choices.
The economic model's assumptions, while not always reflecting the real-world decision-making process, can be useful in understanding the behavior of actors in certain scenarios, such as agriculturalists making decisions about land use. Under the economic model, factors like land quality and transportation advantages are controlled, allowing the examination of profit-maximization behavior under simplified conditions.