Introduction to Engineering Economics
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Introduction to Engineering Economics

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Questions and Answers

What does Engineering Economics primarily involve?

  • The evaluation of cost and benefits of technical projects. (correct)
  • The application of physics in engineering design.
  • The promotion of engineering careers.
  • The development of new engineering techniques.

    • Which principle emphasizes the need to generate and compare different alternatives in engineering decisions?

  • Focus on the Difference
  • Develop the Alternatives (correct)
  • Use a Common Unit of Measure
  • Use a Consistent Viewpoint

    • What is the main objective behind focusing on the differences between alternatives?

  • To ensure all alternatives are equally considered.
  • To select a future course of action based on potential outcomes. (correct)
  • To simplify the decision-making process.
  • To prioritize creative ideas.

    • Which principle advises using a common unit of measurement in engineering economics?

    <p>Use a Common Unit of Measure</p> Signup and view all the answers

    What is a recommended method for generating alternatives as per engineering economics principles?

    <p>Utilize a brainstorming session.</p> Signup and view all the answers

    Which of the following best describes 'Considering All Relevant Criteria' in decision-making?

    <p>Both monetary and qualitative criteria should be considered.</p> Signup and view all the answers

    In which scenario is a consistent viewpoint particularly important during decision-making?

    <p>When defining future goals.</p> Signup and view all the answers

    Which principle of engineering economics focuses on future outcomes during decision-making?

    <p>Focus on the Difference</p> Signup and view all the answers

    What are the essential elements known as that cooperate in the process of production?

    <p>Factors of Production</p> Signup and view all the answers

    Which factor of production refers to human physical or mental effort?

    <p>Labor</p> Signup and view all the answers

    What is defined as the creation of utilities in economics?

    <p>Production</p> Signup and view all the answers

    What type of consumption leads to the final satisfaction of collective wants?

    <p>Collective Consumption</p> Signup and view all the answers

    Investment is best described as what part of production?

    <p>The part that is saved for future production</p> Signup and view all the answers

    What reflects the way total output, income, or wealth is distributed among individuals?

    <p>Distribution</p> Signup and view all the answers

    What does the term 'demand' refer to in economics?

    <p>The desired amount to be sold at a specific price</p> Signup and view all the answers

    What is the excess of production over consumption called?

    <p>Investment</p> Signup and view all the answers

    What should organizations recognize when projecting future outcomes?

    <p>The inherent risk and uncertainty</p> Signup and view all the answers

    Why is it important for organizations to revisit their decisions?

    <p>To learn from past experiences and adapt</p> Signup and view all the answers

    What does the study of economics primarily focus on?

    <p>Resource allocation, opportunity costs, and project evaluation</p> Signup and view all the answers

    What is the relationship between scarcity and economic choice?

    <p>Scarcity creates problems of choice</p> Signup and view all the answers

    Which of the following reflects the economic concept of 'utility'?

    <p>The satisfaction derived from consuming a product</p> Signup and view all the answers

    What are basic economic activities primarily aimed at?

    <p>Satisfying material needs</p> Signup and view all the answers

    According to economic principles, how do humans typically address their wants?

    <p>By acquiring wealth through efforts</p> Signup and view all the answers

    What indicates a good organization based on economic principles?

    <p>Ability to learn and adapt</p> Signup and view all the answers

    Which of the following is classified as a consumer good or service?

    <p>Banking services</p> Signup and view all the answers

    What type of cost refers to expenses that remain constant regardless of production levels?

    <p>Fixed costs</p> Signup and view all the answers

    Which of the following is an example of incremental cost?

    <p>Cost for an additional 10 units of production</p> Signup and view all the answers

    Variable costs can best be described as costs that:

    <p>Increase as production increases</p> Signup and view all the answers

    Which of the following factors is NOT an example of a fixed cost?

    <p>Utility costs fluctuating with usage</p> Signup and view all the answers

    Producer goods and services are primarily used for:

    <p>Producing other goods and services</p> Signup and view all the answers

    Which type of cost would include the purchase of raw materials?

    <p>Variable costs</p> Signup and view all the answers

    An example of a producer good would be:

    <p>Computers used for design</p> Signup and view all the answers

    What type of cost can be directly measured and attributed to a specific activity or output?

    <p>Direct costs</p> Signup and view all the answers

    Which costs refer to transactions that involve the payment of cash?

    <p>Cash costs</p> Signup and view all the answers

    What is an example of a sunk cost?

    <p>The down payment made on a non-purchased car</p> Signup and view all the answers

    What does opportunity cost refer to?

    <p>The cost of resources owned and used in production</p> Signup and view all the answers

    Which of the following best describes investment cost?

    <p>Capital required to start a project</p> Signup and view all the answers

    What are operation and maintenance costs primarily related to?

    <p>Costs linked to hiring and equipment maintenance</p> Signup and view all the answers

    How is working capital defined?

    <p>Money required for day-to-day operations</p> Signup and view all the answers

    What does salvage value refer to?

    <p>The trade-in value of equipment after use</p> Signup and view all the answers

    Study Notes

    Introduction to Engineering Economics

    • Engineering Economics integrates knowledge from physics, chemistry, life sciences, and mathematics to enhance human prosperity through large-scale product development.
    • Economics focuses on the production, distribution, and consumption of goods and services.
    • Engineering Economics involves evaluating costs and benefits related to technical projects.

    Principles of Engineering Economics

    • Develop Alternatives: Utilize brainstorming to generate creative options for decision-making.
    • Focus on the Difference: Analyze future outcomes to prioritize and differentiate alternatives.
    • Use a Consistent Viewpoint: Base prospective outcomes on a defined perspective, often representing stakeholders' interests.
    • Use a Common Unit of Measure: Provide clarity by using a standard measurement for costs and profits, facilitating easier comparisons.
    • Consider All Relevant Criteria: Evaluate multiple criteria in decision-making processes, considering both monetary and descriptive evaluations.
    • Make Uncertainty Explicit: Acknowledge risks and uncertainties in projecting future outcomes for informed analysis.
    • Revisit Your Decisions: Encourage learning and adaptation by comparing initial projections with actual results.

    Economic Concepts

    • Economics provides insights into resource allocation, opportunity costs, and project evaluation—fundamental in decision-making.
    • Human wants are unlimited, but resources to satisfy these wants are limited, creating the need for economic choices.
    • Basic economic activity involves satisfying material needs through production, consumption, and investment processes.

    Basic Economic Activities

    • Production: The creation of goods and services, involving factors such as land, labor, capital, and entrepreneurship.
    • Consumption: Utilization of goods and services, classified into individual and collective consumption.
    • Investment: Savings from production used for future capital formation.
    • Distribution: Method of allocating output and wealth among individuals and production factors.

    Supply and Demand Concepts

    • Demand is essential in business; it reflects how much of a good will be purchased at specific prices.
    • The relationship between price and quantity demanded is critical for understanding consumer behavior.

    Consumer and Producer Goods

    • Consumer Goods: Directly satisfy consumer needs (e.g., food, clothing, services).
    • Producer Goods: Used to produce consumer goods and other producer goods (e.g., machinery, infrastructure).

    Cost Concepts

    • Fixed Costs: Constant expenses regardless of production levels (e.g., rents, salaries).
    • Variable Costs: Fluctuate with production levels (e.g., raw materials, utility costs).
    • Incremental Costs: Additional costs from producing one more unit.
    • Standard Costs: Anticipated costs per output unit.
    • Direct Costs: Attributable to specific outputs; Indirect Costs: Cannot be linked to specific activities.
    • Cash Costs: Involve cash transactions; Book Costs: Non-cash costs like depreciation.
    • Sunk Costs: Past expenses that influence future decisions but are irrecoverable.
    • Opportunity Costs: The value of the next best alternative forgone by using resources for a current project.
    • Investment Costs: Initial capital required for project commencement, often involving progressive payments over time.
    • Operation and Maintenance Costs: Expenses related to daily operations, including labor and materials.
    • Working Capital: Funds necessary for daily enterprise operations.
    • Salvage Value: The estimated resale value of equipment after it has been used.

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    Description

    This quiz explores the fundamental principles of engineering economics, focusing on evaluating the costs and benefits of technical projects. Learn how to develop alternatives, analyze future outcomes, and prioritize decisions using a consistent viewpoint. It integrates knowledge from various scientific fields to enhance product development and human prosperity.

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