Economic Analysis and Engineering Economics Flashcards
7 cards from real CCP practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Economic Analysis and Engineering Economics flashcards as text
Which depreciation method allocates an equal amount of depreciation expense in each year of an asset's useful life?
Answer: Straight-Line Method
The straight-line method spreads the depreciable cost (cost minus salvage value) evenly over the useful life, yielding a constant annual depreciation charge.
The Modified Accelerated Cost Recovery System (MACRS) is primarily used for:
Answer: Federal income tax depreciation in the United States
MACRS is the depreciation system mandated by the U.S. IRS for calculating tax deductions, allowing accelerated write-offs in the early years of asset life.
What is the Minimum Attractive Rate of Return (MARR) in engineering economic analysis?
Answer: The minimum return threshold an organization requires before accepting an investment
MARR is a management-set threshold reflecting the opportunity cost of capital; projects must earn at least this rate to be economically acceptable.
When comparing two mutually exclusive alternatives with different useful lives, the most rigorous approach is to use:
Answer: The Annual Worth Method or a Least Common Multiple (LCM) study period
The Annual Worth Method or LCM study period ensures alternatives are compared on an equivalent time basis, avoiding distortion from unequal lifespans.
In a public-sector Benefit-Cost Analysis, 'disbenefits' are best described as:
Answer: Negative consequences or losses experienced by the public due to the project
Disbenefits are disadvantages or negative impacts borne by the public (not the project sponsor), such as traffic disruption during construction, subtracted from gross benefits.
Sensitivity analysis in economic decision-making is best described as:
Answer: Examining how changes in one or more key input variables affect the economic outcome
Sensitivity analysis systematically varies key assumptions (e.g., interest rate, cost, revenue) to determine how robust an economic decision is to uncertainty in inputs.
Which of the following is the best example of an 'external cost' (externality) in economic analysis?
Answer: Air and noise pollution from a factory affecting the surrounding community
External costs are costs imposed on third parties outside the economic transaction, such as pollution damage borne by the community rather than the producer.