Engineering Economics Flashcards
6 cards from real EIT practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Engineering Economics flashcards as text
Which analysis method compares alternatives by converting all costs to an equivalent annual amount?
Answer: Annual Worth (AW) method
The Annual Worth method converts all cash flows to a uniform annual series, allowing direct comparison of alternatives with different lifespans.
Sensitivity analysis in engineering economics is used to:
Answer: Identify which input variables most impact the project outcome
Sensitivity analysis varies one input at a time to determine which uncertainties most significantly affect project profitability.
In an economy of scale, as production volume increases, the average cost per unit:
Answer: Decreases
Economies of scale reduce average unit cost as production volume increases, since fixed costs are spread over more units.
The economic order quantity (EOQ) model minimizes:
Answer: Total inventory cost (carrying + ordering)
EOQ minimizes total inventory cost by balancing holding/carrying costs against ordering costs at the optimal order quantity.
What is opportunity cost?
Answer: The foregone value of the next-best alternative
Opportunity cost is the value of the best forgone alternative — what you give up when choosing one option over another.
Inflation affects engineering economic analysis primarily by:
Answer: Reducing the real purchasing power of future cash flows
Inflation erodes the purchasing power of future cash flows, meaning nominal future dollars are worth less in real terms.