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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

  1. 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.

  2. 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.

  3. 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.

  4. 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.

  5. 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.

  6. 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.