ST.JOSEPH ECONOMICS QUESTION BANK

1. We Make You Shine St.Joseph‟s Institute of Technology St.Joseph‟s Group of Institutions OMR, Chennai – 600 119 Department of Mechanical Engineering SUB CODE / NAME: MG6863/ Engineering Economics MULTI CHOICE QUESTIONS 1.Which of the following are the economic goals? a)Price Stability b)Efficiency c)Growth d)All of the above 2.The flow back of profit plus depreciation from a given project is called a) Cash Flow b) Capital Flow c) Economic Return d) Earning ValueUsing faulty or inaccurate data 3.The point of intersection of the supply curve and demand curve is a)Stability point b)Equilibrium point c)Optimum point d)None of the above 4.Which of the factors does not influencing demand? a)Income of the people b)Price of related goods c)Cost of the inputs d)Tastes of consumers 5.________ also called the compound interest method of depreciation a)Sum of the digits of methods b)Straight line methods c)Annuity methods d)Sinking Fund method 6.If the cost of inputs increases, then naturally, the cost of the product will go up. In such a situation, at the prevailing price of the product the profit margin per unit will be a)More b)Less c)Same d)None of the above 7._____ also known as the reducing balance method, is an accelerated depreciation method that records larger depreciation expenses during the earlier years of an asset’s useful life, and smaller ones in later years. a)Sum of the digits of methods b)Straight line methods c)Declining methods d)Sinking method 8.The ratio of the output to input of a business system is a)Technical efficiency b)Economic efficiency c)Efficiency

2. We Make You Shine St.Joseph‟s Institute of Technology St.Joseph‟s Group of Institutions OMR, Chennai – 600 119 Department of Mechanical Engineering d)All of the above 9.SYD abbreviation is a)Sum of the years digits of methods b)Straight of the year digits methods c)Sum of the years Declining methods d)Sum of the years Sinking method 10.ich of the following ways is used to improve productivity? a)Increased output for the same output b)Decreased input for the same output c)Simultaneous increase in the output with decrease in input d)All of the above 11.A depreciation of a currency occurs when: a)The value of the currency falls b)The value of the currency increases c)Inflation falls d)The balance of payment improves 12.Which of the following are limitations of break-even analysis? A) Static concept b)Capital employed is taken into account. c)Limitation of non-linear behavior of costs d)Limitation of presence of perfect competition 13.What are the various methods used in depreciation calculation? a)Straight line method & Declining balance method b)Sum of the years digits method c)Sinking fund or annuity & Service output method d)All the above. 14.Given selling price is Rs 10 per unit, variable cost is Rs 6 per unit and fixed cost is Rs 5,000. What is break-even point? a)500 units b)1,000 units c)1,250 units d)None of the above 15.Equipment history cards are meant to record a)The way equipment behaves b) Total down time of the equipment c)The rate at which different components wear off d)All of the above 16.Given selling price is Rs 20 per unit, variable cost is Rs 16 per unit contribution is a)Rs 1.25 per unit b)Rs 4 per unit c)Rs 0.8 per unit d)None of the above

3. We Make You Shine St.Joseph‟s Institute of Technology St.Joseph‟s Group of Institutions OMR, Chennai – 600 119 Department of Mechanical Engineering 17.The following is (are) scheduled maintenance a) Overhauling of machine b) Cleaning of tank c)Whitewashing of building d)All of the above 18.Cost of sales +Profit a)Factory cost b)Costs of production c)Sales d)Selling price per unit 19.The time elapsed from the point the machine fails to perform its function to the point it is repaired and brought into operating condition is known as a)Down time b) Break Down time c) Both (A) and (B) d) Idle time 20.The cost of producing an additional unit of the product. a)Marginal Cost b)Marginal Revenue c)Sunk Cost d)Opportunity Cost 21.The following is not a classification of maintenance a)Corrective maintenance b)Timely maintenance c)Scheduled maintenance d)Preventive maintenance 22.Pick up the correct statement from the following: a)Over head rate = total over head in rupees for period/Direct labour in rupees for periodAir and Fuel b)Over head cost per unit = Overhead ratio × direct labour cost/unit c)Both (a) and (b) d)Neither (a) nor (b) 23.What is the reduction in the money value of capital asset is called? a) Capital Expenditure b) Capital Loss c) Loss d) Deficit 24.The financial analysis: a)Helps a share holder to compare the expected return on his investment in the firm against the expected return from other alternative investment b)Helps a bank to know the financial position of the firm for granting a loan to the firm c)Helps to judge the success of the firm's financial plans d)All of these

4. We Make You Shine St.Joseph‟s Institute of Technology St.Joseph‟s Group of Institutions OMR, Chennai – 600 119 Department of Mechanical Engineering 25.In independent projects evaluation, results of internal rate of return and net present value lead to: a) Cash flow decision b) Cost decision c) Same decisions d) Different decisions 26.A project construction cost estimate includes: a)The labour and material cost b)The equipment and over head cost c)The profit of the contractor d)All of these 27.In a non standard cash flow diagram, the cash flows are converted to time a)1 b)0 c)2 d)Infinity 28.Current ratio is: a)Current assets/Current liabilities b)(Current assets + loans)/Current liabilities c)(Current assets + loans advances)/Current liabilities d)None of these 29.The rate of return of a cash flow pattern is the interest rate at which the cash flow reduces to a)1 b)0 c)2 d)Infinity 30.The CRF (ep) is also known as: [CRF(EP) - 8% - 7], where a)8% is the rate of interest per year b)Money is borrowed for n = 7 years c)Both (a) and (b) d)Neither (a) nor (b) 31.In a non standard cash flow diagram, the cash flows are converted to time a)1 b)0 c)2 d)Infinity 32.The person desires to pay off the amount in 10 equal annual instalments. The amount of each installment is: a) Rs. 5638 b) Rs. 6638 c) Rs. 7738 d) None of these 33.In a Cost Dominated Cash flow diagram, the expenditure represents a)Cash Inflows b)Cash Outflows c)Losses d)Earnings 34.Each financial ratio is generally compared by a)A past ratio calculated from the past financial standard of the firm

5. We Make You Shine St.Joseph‟s Institute of Technology St.Joseph‟s Group of Institutions OMR, Chennai – 600 119 Department of Mechanical Engineering b)A ratio developed by using the projected financial statement of the firm c)A ratio of some selected firms most progressive and successful at the point of consideration d)All of these 35.The present value of a future amount: a) Will always be less than the future amount b) Can be calculated precisely if the discount rate and number of periods is known c) Is worth less than the future value d) Both a. and b. above are true 36.Present worth Annuity (PWA) is generally known as a)Premium annuities b)Income annuities c)Future annuities d)All of these 37.A company purchases goods but does not pay payments to the suppliers immediately and record them as a)Account payable b)Account receivable c)Current liabilities d) Accumulated liabilities 38.Pick up the correct statement from the following: a)The capital required to get a project started is the first cost b)The first cost is a single cash flow or a series of cash flows that are made in the beginning of the activity's life span c)The first cost of purchasing a car is the sum of the down payment, taxes and dealers charges d)All of these 39.Time value of money supports the comparison of cash flows recorded at different time period by a)Discounting all cash flows to a common point of time b)Compounding all cash flows to a common point of time c)Using either a or b d)None of the above. 40.The key to profitable operation for project cost control, is: a)To keep the project cost equal to original cost estimate b)To keep the project cost equal to subsequent construction budget c)To keep the project cost within the cost budget and knowing when and where job costs are deviating d)None of these

6. We Make You Shine St.Joseph‟s Institute of Technology St.Joseph‟s Group of Institutions OMR, Chennai – 600 119 Department of Mechanical Engineering 41.Buying of goods or services from suppliers or vendors of some other country instead of local supplier is classified as a)Outsourcing b)In sourcing c)Idle sourcing d)Sunk sourcing 42.What is considered as the basic consuming or demanding unit of a commodity? a)Seller b)Manufacturer c)Producer d)Buyer or consumer 43.Using equation method, Break-even point is calculated as a)Sales = Variable expenses + Fixed expenses + Profit b)Sales = Variable expenses + Fixed expenses - Profit c)Sales = Variable expenses - Fixed expenses + Profit d)None of the above 44.“Under conditions of perfect competition, the price at which any given product will be supplied and purchased is the price that will result in the supply and the demand being equal.” This statement is known as the: a)Law of diminishing return b)Law of supply c)Law of demand d)Law of supply and demand 45.Under ordinary simple interest, how many days in one year? a) 300 Income and price of a commodity b) Income and quantity demanded c) Price and quantity of a commodity d) Quantity demanded and quantity supplied 46.What refers to the amount of money paid for the use of borrowed capital? a)Interest b)Rate of interest c)Simple interest d)Principal 47.The additional cost incurred for the production of one more unit of a product or service is called _____________ . a)Fixed cost b)Marginal cost c)Variable cost d)Average cost 48.What is defined as the reduction or fall of the value of an asset due to constant use and passage of time? a)Depletion b)Inflation c)Depreciation d)Deflation

7. We Make You Shine St.Joseph‟s Institute of Technology St.Joseph‟s Group of Institutions OMR, Chennai – 600 119 Department of Mechanical Engineering 49.The ______ method is used to accelerate the recognition of depreciation. a)Sum of methods b)Sum of digits of methods c)Declining methods d)Sinking method 50.Salvage value is sometimes known as a) Scrap value b) Going value c) Junk value d)Second-hand value 51.________ is a method of calculating depreciation and amortization, the process of expensing an asset over a longer period of time. a)Straight line methods b)Sum of digits of methods c)Declining methods d)Sinking method 52.When the alternatives have identical cost, as per present worth analysis technique the focus should be on . a)Maximizing present worth (benefit) b)Maximizing present worth (cost) c)Maximizing present worth (cost - benefits) d)None of the above 53.Under the diminishing balance method of depreciation, it: a)Decrease every year b)Increase every year c)Remain constant every year d)None of them 54.Which of the following is used for selecting the best alternative from among a set of mutually exclusive alternatives in economic analysis ? a)Present worth analysis b)Annual cash flow c)Rate of return d)All of the above 55.What are the reasons for providing depreciation? a)To know the correct profits. b)To show correct financial positions. c)To make provision for replacement of assets. d)All the Above 56.Which theory describes money received in the current time it has more worth than money received in future a)Cash value of money b)Time value of money c)Storage value of money d)Lead value of money .

8. We Make You Shine St.Joseph‟s Institute of Technology St.Joseph‟s Group of Institutions OMR, Chennai – 600 119 Department of Mechanical Engineering 57.(Number of breakdowns / Available machine hours) = a)Frequency effectiveness b)Frequency of breakdown c)Effectiveness of maintenance planning d)None of the above 58.Time value of money indicates that a)A unit of money obtained today is worth more than a unit of money obtained in future b)A unit of money obtained today is worth less than a unit of money obtained in future c)There is no difference in the value of money obtained today and tomorrom d)None of the above 59.By using computers to design and manufacture products, firms are able to a)Reduce production costs. b)Reduce the optimal lot size. c)Reduce the time required to introduce new products. d)All of the above. 60.Net Profit ratio is calculated by a)(Gross Profit/Gross sales)*100 b)(Gross Profit/Net sales)*100 c)(Net Profit/Net sales)*100 d)None of the above 61.Belt of an electric motor is broken, it needs a)Scheduled maintenance b) Corrective maintenance c)Preventive maintenance d)Timely maintenance 62.The following is not a classification of maintenance a)Corrective maintenance b)Timely maintenance c)Scheduled maintenance d)Preventive maintenance 63.With the increase in preventive maintenance cost, breakdown maintenance cost a)Decreases b) Increases c) Remain same d)Any of the above 64.Predictive maintenance is used to determine: a)When preventive maintenance was last performed. b)When preventive maintenance should be performed. c)Which resources should be maintained via preventive maintenance. d)Which resources should be maintained via breakdown maintenance. 65.The best alternative under Future worth method is implemented based on a)Maximum Net Cost b)Maximum Net Revenue c)Minimum Net Revenue d)Minimum Salvage Value

9. We Make You Shine St.Joseph‟s Institute of Technology St.Joseph‟s Group of Institutions OMR, Chennai – 600 119 Department of Mechanical Engineering 66.If a batch of 200 electronic components is tested for 400 hours and 5 fail during the test, what is the failure rate as a percentage? a) 2.5% b) 1.25% c) 5% d) 10% 67.In a revenue dominated cash flows, the best alternative is chosen with a)High Revenue b)Low Cost c)Low Present worth d)High Present worth 68.Which of the following is not an important condition for preventive maintenance? a)Size b)Age c)Location d)Oils used 69.What is the ratio of preventive maintenance and total maintenance in primary-metal industry? a)Cash recovery b)Cash flow c)Economic return d)Earning value 70.Preventive maintenance and its application is an expensive process. a)True b)False 71.What refers to the present worth of the probable future net earnings? a)Earning value b)Total market value c)Going concern value d)Total value 72.Which one of the following statements is correct? a)The number of years required to recover the initial cash investment in a project, is called Pay Back period (PBP). b)The discount rate that equates the present value of the expected Net Cash Flows (CFs) with the Initial Cash Outflow (ICO) is known as internal rate of return. c)The present value of the proposal's net cash flows, less the proposal's initial cash outflow is known as the Net Present Value (NPV) d)All of these 73.The future or present value of an amount depends upon: a)The interest rate. b)The number of periods. c)Number of times per year compounding occurs. d)All of the above. 74.Which of the following would be a liability for a business? a)The amount it has paid for the electricity used b)Trade receivables c)A charitable donation the business plans to make in the future d)Trade payables 75.If the nominal rate of interest is 10% per annum and there is quarterly compounding,

10. We Make You Shine St.Joseph‟s Institute of Technology St.Joseph‟s Group of Institutions OMR, Chennai – 600 119 Department of Mechanical Engineering the effective rate of interest will be: (a) 10% per annum (b) 10.10 per annum (c) 10.25%per annum (d) 10.38% per annum 76.If real money demand remains constant, then a 10% increase in the nominal money supply will cause a)Saving to rise by 10%. b)Real income to rise by 10%. c)The real interest rate to rise by 10%. d)The price level to rise by 10%. 77.If the management decides to manufacture a product it in own factory, the focus should be on a)Cost factors b)All Non-cost factors c)Both a and b d)None of the above All of the below. 78.A machine with 6 years of life was purchased two years ago for Rs. 10,000. Its annual maintenance cost is Rs. 750 and salvage value at the end of its life is Rs. 1,000. Now, a company is offering a new machine at a cost of Rs. 10,000. Its life is four years and its salvage value at the end of its life is Rs. 4,000. The annual maintenance cost of the new machine is Rs. 500. The company which is supplying the new machine is willing to take the old machine for Rs. 8,000 if it is replaced by the new machine. Assuming interest rate of 12%, compounded annually, the replacement analysis suggest that a)It is better to replace existing machine b)It is better to retain the existing machine c)It can’t be decided d)None of the above 79.Given selling price is Rs 20 per unit, variable cost is Rs 16 per unit contribution is a) Rs 5.55 per unit b) Rs 4.44 per unit c) Rs 4 per unit d)None of the above 80.Which one is not a type of FMECA? a)System b)Design c)Process d)Manufacture 81.Which of the following are the assumptions of marginal costing? a)All the elements of cost can be divided into fixed and variable components. b)Total fixed cost remains constant at all levels of output. c)Total variable costs varies in proportion to the volume of output. d)Per unit selling price remain unchanged at all levels of operating activity. (a) A and B (b) B and C (c) A and D (d) All the above 82.How inflation affects the price of the commodities? a)Price of the commodities decreases b)Price of the commodities increases c)No effect

11. We Make You Shine St.Joseph‟s Institute of Technology St.Joseph‟s Group of Institutions OMR, Chennai – 600 119 Department of Mechanical Engineering d)First the price decreases later on increases 83.Which of the following is not true for the variable cost? a)Variable cost is zero when output quantity is zero. b)Initially with increase in production variable cost per quantity reduces but beyond some point it increases sharply. c)Economic of scale greatly effects variable cost d)Costs like insurance, license fees, etc are example of variable cost. 84.When there is high inflation in the economy, how will it affect the supply of money in the economy? a)No effect on the money supply b)Supply of money decreases c)Supply of money increases d)None of the above 85.When too much money chases too few goods, the resulting Inflation is called: a)Deflation b)Demand-pull Inflation c)Cost push inflation d)Stagflation 86.Stagflation means: a)Inflation with stagnation b)Recession with stagnation c)Inflation galloping like stage d)Inflation & increasing output 87.All of the following are usually included in an engineering economic analysis except a)Sunk cost b)Variable cost c)Fixed cost d)Total revenue 88.When price increases due to increase in factor prices it is a)Demand pull inflation b)Cost pull inflation c)Stagflation d)None of the above. 89.The difference between the present and future worth of money at some time in the future is called a)Discount b)Deduction c)Inflation d)Depletion 90.Under the diminishing balance method depreciation it: a)Increases every year. b)Decreases every year. (T) c)Remain constant every year. d)None of them. 91.What refers to the interest rate at which the present work of the cash flow on a project is zero of the interest earned by an investment? a)Rate of return b)Yield c)Rate of return through variable sources .

12. We Make You Shine St.Joseph‟s Institute of Technology St.Joseph‟s Group of Institutions OMR, Chennai – 600 119 Department of Mechanical Engineering d)Return of investment 92.Under the diminishing balance method, depreciation is calculated on: a)Scrap value b)On original value c)On book value (T) d)None of them 93.The economic factors causing depreciation: a)Time factor b)Obsolescence and inadequacy c)Wear and tear d)Money valuation 94.Which of the following is consistent with an increase in the inflation rate? a)A decrease in the mark-up coefficient. b)An increase in expected inflation rate. c)A decrease in unemployment benefits. d)All of the above 95.Depreciation fund method is also known as a)Sinking fund method b)Annuity method c)Sum of year’s digits method d)none of these 96.In the provision method of depreciation the asset always appears at: a)Cost price b)Market Price c)Scrap Value d)None 97.Depreciation is: (a)An income (b)An asset (c)A loss (d)A liability 98.An asset is purchased for Rs 9,000. Its estimated economic life is 10 years after which it will be sold for Rs 1,000. Find the depreciation in the first three years using Sum-of-years digit method. a) Rs 3,279.27 b) Rs 3,927.27 c) Rs 3,729.27 d) Rs 3,792.72 99.Depreciation does not depend on fluctuations as: (a)Market value of asset (b)Cost of price of asset (c)Scrap value of asset (d)None of these 100.A machine cost of Rs 8,000 and an estimated life of 10 years with a salvage value of Rs 500. What is its book value after 8 year using straight line method? a) Rs 2,000 b) Rs 2,100 c) Rs 2,200 d) Rs 2,300

13. We Make You Shine St.Joseph‟s Institute of Technology St.Joseph‟s Group of Institutions OMR, Chennai – 600 119 Department of Mechanical Engineering Answer key 1.d 2.a 3.b 4.c 5.c 6.b 7.c 8.b 9.a 10.d 11.a 12.a 13.d 14.c 15.d 16.b 17.d 18.c 19.c 20.a 21.b 22.c 23.b 24.d 25.c 26.d 27.b 28.a 29.b 30.c 31.b 32.a 33.b 34.d 35.d 36.d 37.a 38.d 39.c 40.c 41. a 42 .d 43.a 44.d 45.c 46 .a 47.b 48 .c 49 .b 50.d 51.a 52.a 53.a 54.d 55.d 56.b 57.b 58.a 59.d 60.c 61.b 62.b 63.a 64.b 65.b 66.a 67.d 68.d 69.b 70.a 71.a 72.d 73.d 74.d 75.d 76.d 77.a 78.a 79.c 80.d 81.d 82.b 83.d 84.a 85.c 86.b 87.c 88.b 89.a 90.a 91.a 92.a 93.c 94.b 95.b 96.a 97.a 98.b 99.c 100.b