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
Life Cycle Cost (LCC) analysis in engineering economics encompasses:
Answer: All costs from acquisition through disposal over the asset's entire life
LCC includes all costs — acquisition, installation, operation, maintenance, and disposal — over the full life of an asset, ensuring total economic comparison.
The 'sunk cost' principle in engineering economics states that sunk costs should be:
Answer: Ignored when making future economic decisions because they are unrecoverable
Sunk costs are past expenditures that cannot be recovered regardless of future actions, so they are irrelevant to forward-looking economic decisions.
In economic analysis, 'opportunity cost' is best defined as:
Answer: The value of the best foregone alternative when a resource allocation decision is made
Opportunity cost is the economic value of the best alternative that must be sacrificed when a choice is made among competing uses of scarce resources.
Break-even analysis identifies the point at which:
Answer: Total revenues exactly equal total costs, yielding neither profit nor loss
Break-even is the output level or sales volume at which total revenue equals total cost, resulting in zero profit — the minimum viable performance threshold.
According to the Fisher equation, how does inflation affect the relationship between nominal and real rates of return?
Answer: The real rate of return is lower than the nominal rate when inflation is positive
The Fisher equation shows that the real rate ≈ nominal rate − inflation rate; positive inflation reduces the real purchasing power of returns below the nominal rate.
A 'Uniform Annual Series' (annuity) in engineering economics is characterized by:
Answer: Equal cash flow payments occurring at regular intervals over a specified number of periods
A uniform annual series (annuity) consists of equal cash flows at equally spaced intervals, serving as a foundation for capital recovery, present worth, and future worth calculations.
In replacement analysis, when should a challenger (new asset) replace a defender (existing asset)?
Answer: When the challenger's annual worth is greater than the defender's annual worth
The economic replacement criterion is that the challenger should replace the defender when the challenger's annual worth (annual benefit minus annual cost) exceeds the defender's annual worth.