Practice Quiz Chapter 01

. Which of the following is not an essential element in the decision-making process?

a) Choosing the best alternative

b) Recognizing the problem

c) Determining how a project should be designed

d) Constructing a model

. Which of the following is not an example of unethical practices in engineering economics?

a) Favouring one group of stakeholders by focusing on their objective for a project.

b) Considering only monetary consequences when there are other significant consequences.

c) Designing an oil platform for a 100-year hurricane instead of a 500-year hurricane.

d) Hiding past mistakes.

. Which of the following is not a strategic decision for which engineering economics may be useful?

a) Equipment or process selection

b) Cost reduction

c) New product or product expansion

d) Scheduling various jobs on different machines

. Which of the following problems is most suitable for analysis using engineering economic analysis?

a) Some $0.30 chocolate bars are on sale for 12 bars for $2.00. John, who eats a couple of chocolate bars per week, must decide whether to buy a dozen at a lower price.

b) Barbara has $90,000 in a bank chequing account that pays no interest. She can either invest it immediately at a desirable interest rate or wait a week and obtain an interest rate that is 0.125 per cent higher.

c) Miguel backed his car into a tree, damaging the fender. He has car insurance that would pay for the fender repair, but if he files a claim for payment, they may downgrade his "good driver" rating and charge him more for car insurance in the future.

d) Sarah has met two university students that interest her. Jack is a music major who is lots of fun to be with. George, on the other hand, is a fellow engineering student, but he does like to dance. Sarah wonders what to do.

. Suppose you own a small engineering firm producing two products: Project A and Project B. The firm can produce either 50 units of Project A or 100 units of Project B in one day if all the firm's resources are spent on the production. What is the opportunity cost of producing one extra Project A?

a) 100 units of Project B

b) 20 units of Project B

c) 2 units of Project B

d) 20 units of Project A

. Wonderful Cloud Ltd. Is considering expanding the operation in Prince George, British Columbia. $1,000 spent on the feasibility study was undertaken past year. Building and equipment would cost $5,000 and $6,000, respectively, for the new operation and $500 would be required for the initial investment in net working capital. What is the amount of sunk cost which should not be included for the operation?

a) $ 500

b) $1,000

c) $1,500

d) $11,000

. Vantech is a startup in Vancouver, producing 1,250 units of output. What is the startup's total cost given the average fixed cost is $15 per unit and the average variable cost is $20 per unit?

a) $12,500

b) $15,625

c) $18,759

d) $31,250

. BBY Ltd., specializing in producing flashlights for bikes, has a fixed cost of $25,000. The selling price of a flashlight is $70 and the variable cost is $20 per unit. How many units does the firm have to sell to break even?

a) 278 units

b) 358 units

c) 500 units

d) 1,250 units

. Suppose you use your parents' basement for your small business which is free for you, though the current rental value is $1,500 per month. Each month your business generates total revenue of $6,000 and incurs a total cost of $3,500. What is the economic profit?

a) $6,000

b) $2,500

c) $1,000

d) $-5000.

. When the output of the firm increases, which of the following statements is correct?

a) The total fixed cost of the firm remains constant.

b) The difference between average total cost and average variable cost becomes smaller

c) The average fixed cost becomes constant.

d) The marginal cost becomes smaller.

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