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DEPT OF ECE EC T71 ENGINEERING ECONOMICS

RAJESWARI S-AP/ECE Page No:1

UNIT I PART - A

1. What is meant by economics?

Economics is the science that deals with the production and consumption of goods and services and the distribution and rendering of these for human welfare.

2. Define engineering economics.

The application of economic principles to engineering problems, for example in

comparing the comparative costs of two alternative capital projects or in determining the

optimum engineering course from the cost aspect.

3. What is managerial economics?

Managerial Economics is the application of economic theory and methodology

to managerial decision making problems within various organizational settings such as a

firm or a government agency.

4. Explain the objectives of managerial economic

1. Growth the business

2. Maximize the profit

3. Maintain the demand and supply

5. Difference between Microeconomics and Macroeconomics.

Microeconomics is the study of particular markets, and segments of the economy. It looks

at issues such as consumer behaviour, individual labour markets, and the theory of firms.

Macroeconomics is the study of the whole economy. It looks at aggregate variables, such as aggregate demand, national output and inflation.

6. Define Managerial Decision.

Any decision regarding the operation of a firm, These decisions include setting target

growth rates, hiring or firing employees, and deciding what products to sell.

7. Explain the profit maximization theory of the firm.

Marginal revenue displays the added revenue from each product sold, the reason the line

has a negative gradient is the factor that as there is a greater quantity supplied.

8. Define Marries balanced rate of growth theory of the firm.

The firm is assumed to grow by diversification and not by merger or acquisition.

The growth of demand for the products of the firm depends on the rate of diversification

and the proportion of successful new products.

9. What is the basic postulate of the behavioral model of cyert and March?

Behavioural Theory of the Firm developed comprehensively by R.M.Cyert and J.G.March

The model has the following sequence:

The firm as a coalition of groups with conflicting goals and interests.

The process of formation of goals of the various groups within the firm.

Defining goals of the firm by top management: satisfying behaviour of the firm. 10. What is decision making? Discuss its important

Decision-making can be regarded as the cognitive process resulting in the selection of a belief or a course of action among several alternative possibilities.

12. Define demand.

Demand is the utility for a good or service of an economic agent, relative to a budget constraint.

13. Define supply.

In economics, supply refers to the amount of a product that producers and firms are willing to sell at a given price all other factors being held constant.

14. Define cost.

An amount that has to be paid or given up in order to get something.

DEPT OF ECE EC T71 ENGINEERING ECONOMICS

RAJESWARI S-AP/ECE Page No:2

15. Define the factors influencing demand.

Income of the people

Prices of related goods

Tastes of consumers UNIT - II

PART A 1. List the criteria for make.

Criteria for make The following are the criteria for make:

1. The finished product can be made cheaper by the firm than by outside suppliers. 2. The finished product is being manufactured only by a limited number of outside firms

which are unable to meet the demand. 2. List the criteria for buy.

Criteria for buy The following are the criteria for buy:

1. Requires high investments on facilities which are already available at suppliers plant. 2. The company does not have facilities to make it and there are more profitable

opportunities for investing companys capital. 3. Define the approaches for make or buy decision.

Types of analysis followed in make or buy decision are as follows: 1. Simple cost analysis 2. Economic analysis 3. Break-even analysis

4. List the types of analysis followed in make or buy decision.

Types of analysis followed in make or buy decision are as follows: 1. Simple cost analysis 2. Economic analysis 3. Break-even analysis

5. Define purchase model

Purchase model is used to calculate the purchasing requirement. The formulae to calculate is given as

02

2

(1 )C

C DQ

rC

k

6. Define manufacturing mode

Manufacturing model is used to calculate the purchasing requirement. The formulae to calculate is given as

02

2

(1 )C

C DQ

rC

k

7. Explain value analysis.

Value Analysis is the systematic application of recognized techniques which identify the function of a product or service, establish a monetary value for the function and provide the necessary function reliably at the lowest overall cost.

8. State value engineering.

Value engineering is the application of exactly the same set of techniques to a new product at the design stage, project concept or preliminary design when no hardware exists to ensure that bad features are not added.

DEPT OF ECE EC T71 ENGINEERING ECONOMICS

RAJESWARI S-AP/ECE Page No:3

9. Define value.

The term value is used in different ways and, consequently, has different meanings. The designer equates the value with reliability; a purchase person with price paid for the item; a production person with what it costs to manufacture and a sales person with what the customer is willing to pay. Value, in value investigation, refers to economic value,

10. List the four types of economic value.

1. Cost value 2. Exchange value, 3. Use value 4. Esteem value

11. Define performance

The performance of a product is the measure of functional features and properties that make it suitable for a specific purpose.

12. Define function.

Function is the purpose for which the product is made. 13. List the classification of function.

1. Primary function 2. Secondary function 3. Tertiary function

14. Write a short note on primary and secondary function.

Primary functions: are the basic functions for which the product is specially designed to achieve. Primary functions, therefore, are the most essential functions whose non-performance would make the product worthless, e.g. a photo frame exhibits photographs, a chair supports weight, a fluorescent tube gives light. Secondary functions: are those which, if not in-built, would not prevent the device from performing its primary functions, e.g., arms of a chair provided support for hands. Secondary functions are usually related to convenience. The product can still work and fulfill its intended objective even if these functions are not in-built and yet they may be necessary to sell the product.

15. Define aim in economics.

To attempt or intend to reach a certain goal.

UNIT - III PART - A

1. Define present worth method. In this method of comparison, the cash flows of each alternative will be reduced to time zero by assuming an interest rate i. Then, depending on the type of decision, the best alternative will be selected by comparing the present worth amounts of the alternatives.

2. Draw the revenue dominated cash flow diagram.

3. Write the formula to find the present worth method. PW(i) = P + R1[1/(1 + i)1] + R2[1/(1 + i)2] + ...

+ Rj[1/(1 + i) j] + Rn[1/(1 + i)n] + S[1/(1 + i)n]

DEPT OF ECE EC T71 ENGINEERING ECONOMICS

RAJESWARI S-AP/ECE Page No:4

4. Draw the cash -dominated cash flow diagram.

5. Write the formula to compute the cash dominated present worth.

PW(i) = P + C1[1/(1 + i)1] + C2[1/(1 + i)2] + ... + Cj[1/(1 + i)j]

+ Cn[1/(1 + i)n] S[1/(1 + i)n] 6. Write the two techniques to find future worth method.

1. Revenue dominated 2. Cash dominated

7. Draw the revenue dominated cash flow diagram for future method.

8. Write the formula to find the present worth method.

FW(i) = P(1 + i)n+ R1(1 + i)n1+ R2(1 + i)n2+ ...

+ Rj(1 + i)nj + ... + Rn + S 9. What is annual equivalent method of comparing alternatives?

In this method, the mutually exclusive alternatives are compared on the basis of equivalent uniform annual worth. The equivalent uniform annual worth represents the annual equivalent value of all the cash inflows and cash outflows of the alternatives at the given rate of interest per interest period. In this method of comparison, the equivalent uniform annual worth of all expenditures and incomes of the alternatives are determined using different compound interest factors namely capital recovery factor, sinking fund factor and annual worth factors for arithmetic and geometric gradient series etc.

10. Write the formula to compute the cash dominated future worth. FW(i) = P(1 + i)n+ C1(1 + i )n1+ C2(1 + i)n2+ ...

+ Cj(1 + i)nj + ... + Cn S 11. Write down the techniques for comparing the worthiness of the project.

1. Present worth method 2. Future worth method 3. Annual equivalent method

12. Define Annual equivalent method

A generalized revenue-dominated cash flow diagram to demonstrate the annual equivalent method of comparison is

13. Define Annual equivalent method.

A generalized cost-dominated cash flow diagram to demonstrate the annual equivalent method of comparison is