Economics for Engineers MCQ set-4

1. In a decision tree arrows coming out of which node have probabilities

(A) Decision node
(B) Random node
(C) Both (a) and (b)
(D) None of these

2. The present worth of an alternative is 0. What do we know about the value of the future worth ?

(A) FW < 0
(B) FW = 0
(C) FW > 0
(D) Cannot be determined without cash flows

3. If the inflation rate is 6% per year and the market interest rate is known to be 15% per year. What is the implied real interest rate in this inflationary economy?

(A) 11.45%
(B) 9.00%
(C) 8.49%
(D) 8%

4. A machine worth Rs. 1,00,000 is purchase by paying Rs. 20,000 down payment and 12 monthly installments of Rs. 8,000 each. The book cost at time of purchase is

(A) Rs. 1,00,000
(B) Rs. 8,000
(C) Rs. 80,000
(D) Rs. 12,000

5. Which of the following statements is correct ?

(A) Engineering economics provides a set of methods by which economic worth of alternatives can be compared
(B) Engineering economics never takes into account non-commercial considerations
(C) Engineering economics does not take into consideration tax liabilities of the firm
(D) Engineering economics is not applicable in the case of public sector undertakings

6. In decision making risk is measured by

(A) Expectation
(B) Mean
(C) Variance
(D) Median

7. The firm’s decision to invest its funds in fixed and long term assets is known as

(A) Assets Planning
(B) Capital Budgeting
(C) Long term Budgeting
(D) Short Term Budgeting

8. Which of the following is not applicable to bottom-up approach to cost estimation ?

(A) The project under consideration is considered at the highest aggregate level
(B) The project under consideration is split into smaller parts and their respective components are identified
(C) Cost estimates are made for each component of each small part and added up
(D) Cost estimates are made for each component of each part of the project and are added up to arrive at the total

9. Costs reflected in accounting system only are callled

(A) Cash cost
(B) Overhead cost
(C) Book cost
(D) Direct cost

10. What is the relationship between Marginal Cost(MC) and Average Cost(AC) curves?

(A) AC cuts the MC from below
(B) MC cuts the AC from below
(C) AC and MC do not cut each other
(D) There is no fixed relationship

11. To compute the updated cost of a boller of the asam capacity in a power plant, we use

(A) Per unit model
(B) Segmenting model
(C) Cost index model
(D) None of these

12. The value of the Power-sizing Exponent(E) indicates Diseconomies of scale when

(A) 0 ≤ E < 1
(B) E > 1
(C) E < 0
(D) E = 1

13. Learning Curve is applicable to the industries with

(A) Low labour turn over
(B) High labour turn over
(C) Huge mechanization
(D) High variable cost

14. If in a power sizing model the power sizing index is greater than 1, then

(A) Per unit price increases with increase in quantity
(B) Per unit price decreases with increase in quantity
(C) Per unit price remains constant with increase in quantity
(D) Per unit price reamins constant with decrease in quantity

15. A portion of the learning curve is

(A) Parallel to Y axis
(B) Parallel to X axis
(C) Cuts the X axis
(D) Cuts the Y axis

16. What is the relation between the slopes of Total Cost(TC) and Total Revenue(TR) curves?

(A) Slope of TR > Slope of TC
(B) Slope of TR < Slope of TC
(C) Slope of TR = Slope of TC
(D) No fixed relation

17. Sunk cost is

(A) Original investment + depreciation – repairing expenses
(B) Original investment – depreciation + repairing expenses
(C) Original investment + depreciation + repairing expenses
(D) Original investment – depreciation – repairing expenses

18. Which of the following is not applicable to bottom-up approach to cost estimation ?

(A) The project under consideration is considered at the highest aggregate level
(B) The project under consideration is split into smaller parts and their respective components are identified
(C) Cost estimates are made for each component of each small part and added up
(D) Cost estimates are made for each componet of each part of the project and are added up to arrive at the total

19. Marginal cost curve cuts the Average Variable cost from

(A) Above at its minimum
(B) Below at its falling part
(C) Below at its minimum point
(D) None of these

20. A person if deposits Rs. 50,000 in a bank at an interest of 10% compounded annually, then the future value at the end of 5 years will be

(A) 80,525
(B) 70,525
(C) 85,525
(D) 90,525