Engineering Economics Overview: Definition and Scope

Question 1

What is the fundamental principle of engineering economics related to money?

Accepted Answer

The time value of money

Answer

The law of diminishing returns

Answer

The principle of opportunity cost

Answer

The compound interest effect

Question 2

Which visual tool is used to represent cash inflows and outflows over time in engineering economics?

Accepted Answer

Cash flow diagram

Answer

Investment timeline

Answer

Project budget

Answer

Net present value graph

Question 3

What is the distinction between an investment and an expense in engineering economics?

Accepted Answer

Investments generate future cash flows, while expenses do not.

Answer

Investments are long-term, while expenses are short-term.

Answer

Investments are made to earn profit, while expenses are made to maintain operations.

Answer

There is no difference between investments and expenses.

Question 4

What is the primary purpose of performing sensitivity analysis in engineering economics?

Accepted Answer

To assess how changes in input parameters affect the results of the economic analysis

Answer

To identify the most significant factors influencing the decision

Answer

To reduce the uncertainty associated with an investment

Answer

To improve the precision of the economic analysis

Question 5

Which of the following is a potential limitation of engineering economic analysis?

Accepted Answer

It may not account for all relevant factors in the decision-making process.

Answer

It is only suitable for large-scale investments.

Answer

It requires complex mathematical calculations.

Answer

It always provides accurate and reliable results.

Question 6

Engineering economics is best described as:

Accepted Answer

Applying economic principles to engineering projects

Answer

Optimizing the financial performance of engineering projects

Answer

Analyzing how engineering decisions affect the economy

Answer

Developing new economic models for engineering projects

Question 7

A primary purpose of engineering economics is NOT to:

Accepted Answer

Predict future project performance

Answer

Compare alternative engineering designs

Answer

Evaluate the economic feasibility of engineering projects

Answer

Optimize the allocation of resources

Question 8

An engineering economic analysis typically considers all of the following EXCEPT:

Accepted Answer

Environmental impact

Answer

Initial investment costs

Answer

Operating costs

Answer

Revenue

Question 9

Which of the following is a core principle of engineering economics?

Accepted Answer

Considering the time value of money

Answer

Applying the law of diminishing returns

Answer

Using the principle of least squares

Answer

遵循能量守恒定律

Question 10

Which of the following is NOT a key component of engineering economics?

Accepted Answer

Thermodynamics

Answer

Time value of money

Answer

Risk analysis

Answer

Cost analysis

Question 11

Which of the following is NOT a benefit of using engineering economics in decision-making?

Accepted Answer

Guaranteed success

Answer

Improved financial performance

Answer

Reduced risk

Answer

Increased efficiency

Question 12

Which of the following is an example of an unrecoverable or sunk cost?

Accepted Answer

Research and development (R&D) expenses

Answer

Marketing expenses

Answer

Equipment purchases

Answer

Salaries

Question 13

Which of the following is NOT a common application of engineering economics in decision-making?

Accepted Answer

Determining employee compensation

Answer

Evaluating capital investments

Answer

Selecting the best manufacturing process

Answer

Optimizing inventory levels

Question 14

Which of the following is NOT a primary goal of engineering economics?

Accepted Answer

To maximize profits in business ventures

Answer

To aid decision-making in the face of uncertainty

Answer

To optimize resource allocation within constraints

Answer

To minimize expenses in construction projects

Question 15

What is the key difference between engineering and economic feasibility?

Accepted Answer

Engineering feasibility assesses technical aspects, while economic feasibility evaluates financial aspects.

Answer

Economic feasibility assesses technical aspects, while engineering feasibility evaluates financial aspects.

Answer

Both engineering and economic feasibility evaluate both technical and financial aspects.

Answer

Neither engineering nor economic feasibility evaluates both technical and financial aspects.

Question 16

Which of the following is NOT a potential benefit of using engineering economics?

Accepted Answer

Increased social media presence

Answer

Improved project decision-making

Answer

Reduced project costs

Answer

Enhanced design efficiency

Question 17

In engineering economics, what does the concept of 'time value of money' refer to?

Accepted Answer

The principle that the value of money changes over time

Answer

The idea that money can be converted between different currencies

Answer

The assumption that money loses value over time due to inflation

Answer

The concept that money can be borrowed and lent at different interest rates

Question 18

What is the main purpose of a cash flow diagram in engineering economics?

Accepted Answer

To visually represent the timing and magnitude of cash flows

Answer

To calculate the net present value of a project

Answer

To determine the internal rate of return

Answer

To analyze the payback period

Question 19

Which of the following is NOT usually considered in the evaluation of engineering projects?

Accepted Answer

Astrological compatibility

Answer

Technical feasibility

Answer

Economic feasibility

Answer

Environmental impact

Question 20

What is the primary role of an industrial engineer in applying engineering economics?

Accepted Answer

To evaluate investment proposals and optimize resource allocation

Answer

To design and implement production systems

Answer

To manage construction projects

Answer

To develop marketing strategies

Question 21

When evaluating the economic viability of a project with uncertain cash flows, which of the following is an important consideration?

Accepted Answer

Performing sensitivity analysis

Answer

Using deterministic models

Answer

Ignoring risk and uncertainty

Answer

Assuming worst-case scenarios

Question 22

The primary objective of engineering economics is to:

Accepted Answer

Analyze the economic aspects of engineering projects

Answer

Forecast the future costs of engineering projects

Answer

Evaluate the environmental sustainability of engineering projects

Answer

Optimize the design of engineering systems

Question 23

Which of the following is not a fundamental concept in engineering economics?

Accepted Answer

Regression analysis

Answer

Time value of money

Answer

Capital budgeting

Answer

Economic feasibility

Question 24

The most widely used method for comparing economic alternatives is:

Accepted Answer

Net present value

Answer

Payback period

Answer

Internal rate of return

Answer

Benefit-cost ratio

Question 25

The salvage value of an asset refers to:

Accepted Answer

Its estimated worth at the end of its useful life

Answer

Its purchase price

Answer

Its scrap value

Answer

Its depreciated value

Question 26

What unique feature distinguishes engineering economics from other disciplines like finance or accounting?

Accepted Answer

Engineering economics incorporates the technical aspects of engineering projects.

Answer

Engineering economics solely aims to maximize profits.

Answer

Engineering economics lacks quantitative elements.

Answer

Engineering economics considers the time value of money but overlooks risk.

Question 27

**What is a key limitation of engineering economic principles when assessing societal projects?**

Accepted Answer

Difficulty in quantifying social and environmental factors

Answer

Inapplicable to projects with long time horizons

Answer

Only applicable to government-funded projects

Answer

Cannot account for risk and uncertainty

Question 28

How does engineering economics facilitate informed decision-making in evaluating and selecting projects?

Accepted Answer

By enabling the evaluation and comparison of project alternatives based on their costs, benefits, and risks.

Answer

By optimizing project schedules to minimize production costs.

Answer

By ensuring that projects adhere to regulatory compliance standards.

Question 29

Which of the following accurately describes a characteristic of engineering economics?

Accepted Answer

It considers both tangible and intangible factors when evaluating alternatives.

Answer

It is not quantitative in nature.

Answer

It is only applicable to large-scale projects.

Answer

It disregards the time value of money.

Question 30

What is the primary goal of conducting an engineering economic analysis?

Accepted Answer

To determine the most economically viable alternative among a set of potential choices.

Answer

To avoid making any decisions.

Answer

To eliminate all risks associated with a project.

Answer

To guarantee a positive return on investment.

Question 31

Which of the following is NOT included in the typical scope of engineering economics?

Accepted Answer

Design and manufacturing process optimization.

Answer

Comparison of capital budgeting methods.

Answer

Assessment of investment viability.

Answer

Evaluation of project alternatives.

Question 32

What is a fundamental principle that underpins the concept of time value of money?

Accepted Answer

Money available today is worth more than the same amount of money in the future.

Answer

Money loses its value over time, regardless of inflation.

Answer

Future money is always more valuable than present money.

Answer

The value of money remains constant over different time periods.

Question 33

Distinguish between an alternative and a decision in the context of engineering economics.

Accepted Answer

An alternative represents a potential course of action, while a decision involves selecting the most suitable alternative.

Answer

Decisions are made before alternatives are identified.

Answer

Alternatives are always mutually exclusive, but decisions can be inclusive.

Question 34

Why is uncertainty a crucial factor to consider in engineering economic analysis?

Accepted Answer

Uncertainties can significantly impact the outcomes and viability of projects.

Answer

Uncertainty is irrelevant in short-term projects.

Answer

Only deterministic values should be used in economic analysis.

Answer

Uncertainty can be completely eliminated through meticulous planning.

Question 35

What is a primary advantage of utilizing spreadsheets in engineering economic analysis?

Accepted Answer

Spreadsheets facilitate complex calculations and enable efficient sensitivity analysis.

Answer

Spreadsheets are not suitable for handling large data sets.

Answer

Spreadsheets guarantee accurate results without the need for verification.

Question 36

How does engineering economic analysis contribute to effective decision-making?

Accepted Answer

It provides a structured and quantitative approach to evaluating alternatives and allocating resources wisely.

Answer

It eliminates the need for creative thinking in decision-making.

Answer

Engineering economic analysis guarantees successful outcomes for all projects.

Answer

It is only applicable to large-scale projects.

Question 37

Which type of project is most suitable for engineering economic analysis?

Accepted Answer

Projects with significant financial implications and long-term consequences.

Answer

Projects with minimal financial impact and short durations.

Answer

Projects that primarily involve qualitative factors.

Question 38

The fundamental goal of engineering economics is:

Accepted Answer

To assist decision-makers in evaluating capital investments.

Answer

To analyze financial aspects of organizations.

Answer

To determine production costs.

Answer

To advance technological innovations.

Question 39

The scope of engineering economics encompasses:

Accepted Answer

Identifying and comparing alternatives, assessing costs, and formulating decisions.

Answer

Solely estimating costs.

Answer

Exclusively identifying and comparing alternatives.

Question 40

A fundamental principle in engineering economics is:

Accepted Answer

Time value of money.

Answer

Perfect market competition.

Answer

Supply and demand equilibrium.

Answer

Marginal cost analysis.

Question 41

Engineering economics differs from traditional economics in that it:

Accepted Answer

Focuses on decision-making under uncertainty and incorporates the time value of money.

Answer

Employs distinct mathematical techniques.

Answer

Deals with larger financial sums.

Question 42

A factor excluded from engineering economic analysis is:

Accepted Answer

Political risk.

Answer

Initial investment cost.

Answer

Operational expenses.

Answer

Salvage value.

Question 43

Sensitivity analysis in engineering economics serves to:

Accepted Answer

Assess the impact of changes in input variables on the economic outcome.

Answer

Eliminate uncertainties in economic analysis.

Answer

Identify the most profitable investment option.

Question 44

When comparing alternatives with varying lifespans, the appropriate method is:

Accepted Answer

Equivalent annual annuity method.

Answer

Present worth method.

Answer

Annual worth method.

Question 45

Inflation in engineering economic analysis can:

Accepted Answer

Distort results if not appropriately accounted for.

Answer

Has no effect on economic analysis.

Answer

Always leads to higher economic benefits.

Question 46

In industrial engineering, engineering economics is applied to:

Accepted Answer

Evaluate the cost-effectiveness of a proposed production line.

Answer

Forecast market demand.

Answer

Design optimal factory layouts.

Question 47

Ethical considerations in engineering economic analysis include:

Accepted Answer

Ensuring transparency, considering social and environmental impacts, and avoiding conflicts of interest.

Answer

Focusing solely on financial benefits.

Question 48

What is the primary focus of engineering economics?

Accepted Answer

Making sound engineering decisions by considering economic factors.

Answer

Analyzing market trends to predict future product demand.

Answer

Managing financial resources for large-scale engineering projects.

Question 49

Which of the following is NOT a typical application of engineering economics?

Accepted Answer

Designing a marketing campaign for a new product.

Answer

Comparing the costs and benefits of alternative energy sources.

Answer

Determining the optimal time to replace equipment.

Answer

Evaluating the profitability of different manufacturing processes.

Question 50

How does engineering economics differ from traditional economics?

Accepted Answer

It focuses on economic decision-making within the constraints of engineering projects.

Answer

It utilizes completely different mathematical and statistical models.

Answer

It is only concerned with short-term financial gains, ignoring long-term sustainability.

Question 51

An industrial engineer is tasked with selecting the most cost-effective material for a new product design. Which aspect of engineering economics is most relevant to this decision?

Accepted Answer

Cost analysis and estimation.

Answer

Depreciation and valuation of assets.

Answer

Risk assessment and mitigation strategies.

Answer

Interest rates and time value of money.

Question 52

What is the significance of the 'time value of money' concept in engineering economics?

Accepted Answer

It acknowledges that money received today is worth more than money received in the future.

Answer

It accounts for the fluctuations in currency exchange rates over time.

Answer

It determines the optimal time to invest in new equipment based on market trends.

Question 53

Which of these factors is LEAST likely to be considered in an engineering economic analysis?

Accepted Answer

Employee morale and job satisfaction.

Answer

Expected operating and maintenance costs over the project lifespan.

Answer

Potential salvage value or disposal costs at the end of the project.

Answer

Initial investment cost for equipment and infrastructure.

Question 54

What is the purpose of conducting a 'break-even analysis' in engineering economics?

Accepted Answer

To determine the point where project costs equal project revenues.

Answer

To assess the environmental impact of a project and identify mitigation measures.

Answer

To evaluate the social and ethical implications of an engineering decision.

Question 55

How can sensitivity analysis aid in making robust engineering economic decisions?

Accepted Answer

By examining how changes in key input parameters affect the outcome of an analysis.

Answer

By identifying the most influential stakeholders who could impact the project's success.

Answer

By developing contingency plans to address potential risks and uncertainties.

Question 56

In the context of engineering economics, what does 'MARR' stand for?

Accepted Answer

Minimum Attractive Rate of Return.

Answer

Market Average Revenue Rate.

Answer

Manufacturing and Assembly Resource Requirements.

Answer

Maximum Allowable Risk Ratio.