There is one other possibility I can think of:

 - Assume Randall meant cretin and pronounced it the British way. 
 - Assume Mike thinks Randall is referring to Cretans. 

Mike is correcting Randall for mispronouncing the nationality, due to Mike not knowing the word cretin and Mike misunderstood the insult.

**This joke is irony**: Mike is uneducated and doesn't know the word cretin, thus proving he is foolish (like a cretin).

If my interpretation is correct, this joke matches the tenor of this later joke in the same scene:

    Randall: "Say hello to the scream extractor"
    Mike: "Hello"