Engineering Economics

Question 1

It is the analysis and evaluation of factors that will
affect the economic success of engineering projects to the end that a
recommendation can be made which will insure the best use of the capital.

Answer 1

Engineering Economy

Question 2

It is the amount of money paid for the use of borrowed capital or
the income produced by money which has been loaned.

Answer 2

Interest

Question 3

It is calculated using the principal only, ignoring any interest
that had been accrued in preceding periods.

Answer 3

Simple interest

Question 4

It is computed on the basis of 12 months of 30
days each or 360 days a year

Answer 4

Ordinary simple interest

Question 5

It is based on the exact number of days in year.

Answer 5

Exact simple interest

Question 6

It is simply a graphical representation of each flows
drawn on a time scale.

Answer 6

Cash-flow diagram

Question 7

Positive cash flow or cash inflow

Answer 7

Receipt

Question 8

Negative cash flow or cash outflow)

Answer 8

Disbursement

Question 9

It is
calculated on the principal plus the total amount of interest accumulated in
previous periods

Answer 9

Compound interest

Question 10

It specifies the rate of interest and a number of
interest periods in one year.

Answer 10

Nominal rate of interest

Question 11

It is the actual or exact rate of interest on the
principal during one year.

Answer 11

Effective rate of interest

Question 12

It is obtained by setting the sum of the values on a certain
comparison or focal date of one set of obligations equal to the sum of the
values on the same date of another set of obligations.

Answer 12

Equation of value

Question 13

Products or services tht are directlt used by people to satisfy their wants

Answer 13

Consumer goods and services

Question 14

Used to produce consumer goods and services or other produce; goods

Answer 14

Producer goods and services

Question 15

Products or services that are required to support human life and activities, that will be purchased in somewhat the same quantity even though the price varies considerably

Answer 15

Necessities

Question 16

Products or services that are desired by humans and will be purchased if money is available after the required necessities have been obtained

Answer 16

Luxuries

Question 17

It is the quantity of a certain commodity that is bought at a certain price at a given place and time

Answer 17

Demand

Question 18

The law of supply and demand may be stated as…

Answer 18

Under conditions of perfect competition the price at which a given product will be supplied and purchasef is the price that will result in the supply and demand being equal

Question 19

It occurs when a decrease in selling price result in a greater than proportionate increase in sales

Answer 19

Elastic demand

Question 20

It occurs when a decrease in the selling price produces a less than proportionate increase in sales

Answer 20

Inelastic demand

Question 21

It occurs when the mathematical product of volume and price is constant

Answer 21

Unitary elasticity of demand

Question 22

The quantity of a certain commodity that is offered for a sale at a certain price at a given place and time

Answer 22

Supply

Question 23

It occurs in a situation where a commodity or service is supplied by a number of vendors and there is nothing to prevent additional vendors entering the market

Answer 23

Perfect competition

Question 24

It exists when a unique product or service is available from a single vendor and that vendor can prevent the entry of all others into the market

Answer 24

Monopoly

Question 25

It exists when there are so few suppliers of a product or service that action by one will almost inevitably result in a similar action by the others

Answer 25

Oligopoly

Question 26

The Law of Diminishing Returns states that…

Answer 26

When the use of one of the factors of production is limited, either in increasing cost or by absolute quantity, a point will be reached beyond which an increase in the variable factors will result in a less than proportionate increase in output

Question 27

Interest is compound compounded at the end of each finite - length period, such as a month, a quarter, or a year

Answer 27

Discrete compounding

Question 28

Cash payments occur one per year, but the compounding is continuous throughout the year

Answer 28

Continuous compounding

Question 29

Difference between the present worth and the worth of the paper at some time in the future

Answer 29

Discount

Question 30

Interest paid in advance

Answer 30

Discount

Question 31

Increase in the prices for goods and services from one year to another, thus decreasing the purchasing power of money

Answer 31

Inflation

Question 32

A series of equal payments occuring at equal periods of time

Answer 32

Annuity

Question 33

One where the payments are made at the end of each period

Answer 33

Ordinary Annuity

Question 34

The first payment is made several periods after the beginning of the annuity

Answer 34

Deferred Annuity

Question 35

One where the payments are made at the beginning of each period

Answer 35

Annuity Due

Question 36

Annuity in which payments are continue indefinitely

Answer 36

Perpetuity

Question 37

Sum of the first cost and the present worth of all costs of replacement, operation, and maintenance for a long time forever

Answer 37

Capitalized cost