Engineering Economics

Which one of the following contains only items

which are considered fixed charges
A. Interest, taxes, amortization, insurance, rent

B. Amortization, insurance, steam cost, painting,

cleaning

C. Interest, taxes, replacements, labor for repairs

D. Interest, taxes, rent, power cost, oil cost

An economic study is made of the total amount cost (C) for a
series of alternative investment (P) for a given project. If C is
plotted as the ordinate versus P, the most desirable occurs when

A. dC/dP=1

B. dC/dP=CO

C. dC/dP=0

D. dC/dP=+1
Reduction in the level of national income and output usually
accompanied by the fall in the general price level.

A. Devaluation

B. Deflation

C. Inflation

D. Depreciation
It is a series of equal payments occurring at
equal interval of time
A. Annuity

B. Depth

C. Amortization

D. Deposit
The place where buyers and sellers come
together
A. Market

B. Business

C. Recreation Center

D. Buy and sell section

A market whereby there is only one buyer for an
item for which there are no good substitute
A. Monopsony

B. Oligopoly

C. Monopoly

D. Oligopsony
It is a series of equal payments occurring at equal interval of
time where the first payment is made after several periods, after
the beginning of the payment

A. Perpetuity

B. Ordinary annuity

C. Annuity due

D. Deferred annuity
The total income equals the total operating cost.

A. Balanced sheet

B. In-place value

C. Check and balance

D. Break even-no gain no loss

Kind of obligation which has no condition
attached
A. Analytic

B. Pure

C. Gratuitous

D. Private
Direct labor cost incurred in the factory and direct material cost
are the costs of all materials that go into production. The sum of
these two direct costs is known as

A. GS and A expenses

B. Operating and maintenance cost

C. Prime cost

D. O and M costs
An index of short term paying ability is called

A. Receivable turn-over

B. Profit margin ratio

C. Current ratio

D. Acid-test ratio
An artificial expenses that spreads the purchase price
of an asset or another property over a number of years.

A. Depreciation

B. Sinking Fund

C. Amnesty

D. Bond
Estimated value at the end of the useful
life.
A. Market value

B. Fair value

C. Salvage value

D. Book value
Consists of the actual counting or determination of the actual
quantity of the materials on hand as of a given date

A. Physical Inventory

B. Material update

C. Technological Assessment

D. Material Count
Additional information of prospective bidders on
contract documents issued prior to bidding date.

A. Delict

B. Escalatory

C. Technological Assessment

D. Bid bulletin
An evil wrong committed by a person damaged
another person’s property or reputation is
A. Tort

B. Material breach

C. Negligence

D. Fraud
A series of uniform accounts over an
infinite period of time.
A. Depreciation

B. Annuity

C. Perpetuity

D. Inflation
The quantity of a certain commodity that is offered for
sale at a certain price at a given place and time

A. Demand

B. Supply

C. Stocks

D. Goods
Work-in process is classified as
A. An asset

B. A liability

C. An expenses

D. An owner’s equity
What is the highest position in the corporation?

A. President

B. Board of directors

C. Chairman of the board

D. Stockholders
Type of ownership in business where individuals
exercise and enjoy the right in their own interest.

A. Equitable

B. Public

C. Private

D. Pure
Decrease in the value of a physical property due
to the passage of time.
A. Inflation

B. Depletion

C. Recession

D. Depreciation
An association of two or more individuals for the purpose of
operating a business as co-owners for profit.

A. Sole proprietorship

B. Company

C. Partnership

D. Corporation
We may classify an interest rate, which specifies the
actual rate of interest on the principal for one year as

A. Nominal rate

B. Rate of return

C. Exact interest rate

D. Effective rate
Parties whose consent or signature in a contract
is not considered intelligent
A. Dead persons

B. Senior citizens

C. Demented persons

D. Minors
It is defined to be the capacity of a commodity
to satisfy human want.
A. Discount

B. Luxury

C. Necessity

D. Utility
It is the amount which a willing buyer will pay to a willing
seller for a property where each has equal advantage and is
under no compulsion to buy or sell.

A. Fair value

B. Market value

C. Book value

D. Salvage value
This occurs in a situation where a commodity or service is
supplied by a number of vendors entering the market.

A. Perfect competition

B. Oligopoly

C. Monopoly

D. Elastic demand
These are products or services that are desired by human and will be
purchased if money is available after the required necessities have
been obtained.

A. Utilities

B. Necessities

C. Luxuries

D. Product goods and services

These are products or services that are required to support
human life and activities, that will be purchased in somewhat
the same quantity even though the price varies considerably.

A. Utilities

B. Necessities

C. Luxuries

D. Product goods and services

A condition where only few individuals produce a certain
product and that any action of one will lead to almost the same
action of the others

A. Oligopoly

B. Semi-monopoly

C. Monopoly

D. Perfect competition
Grand total of the assets and operational
capability of a corporation
A. Authorized capital

B. Investment

C. Subscribed capital

D. Money market
The worth of the property equals to the
original cost less depreciation
A. Scrap value

B. Face value

C. Market value

D. Book value
Money paid for the use of borrowed
capital.
A. Discount

B. Credit

C. Interest

D. Profit
Liquid assets such as cash and other assets that can be converted
quickly into cash, such as accounts receivable and merchandise
are called

A. Total assets

B. Fixed assets

C. Current assets

D. None of the above

The length of time which the property may
be operated at a profit.
A. Physical life

B. Economic life

C. Operating life

D. All of the above

The provision in the contract that indicates the possible
adjustment of material cost and labor cost.

A. Secondary clause

B. Escalatory clause

C. Contingency clause

D. Main clause
The present worth of all depreciation over
the economic life of the item is called
A. Book value

B. Capital recovery

C. Depreciation recovery

D. Sinking fund
Gross profit, sales less cost of good sold, as
a percentage of a sales is called
A. Profit margin

B. Gross margin

C. Net income

D. Rate of return
Worth of the property as shown in the
accounting records of an enterprise
A. Fair value

B. Market value

C. Salvage value

D. Book value
Those funds that are required to make the
enterprise or project a going concern
A. Initial investment

B. Current accounts

C. Working capital

D. Subscribed capital
A market situation where there is only
one seller with many buyer
A. Monopoly

B. Monopsony

C. Oligopoly

D. Oligopsony
A market situation where there are
few sellers and few buyers
A. Oligopoly

B. Oligopsony

C. Bilateral oligopoly

D. Bilateral oligopsony
A market situation where there is one
seller and one buyer.
A. Monopoly

B. Monopsony

C. Bilateral monopoly

D. Bilateral monopsony
A market situation where there are
only two buyers with many sellers
A. Duopoly

B. Oligopoly

C. Duopsony

D. Oligopsony
The cumulative effect of elapsed time on the money value of an
event, based on the earning power of equivalent invested funds
capital should or will earn

A. Present worth factor

B. Interest rate

C. Time value of money

D. Yield
Defined as the future value minus the
present value.
A. Interest

B. Discount

C. Discount

D. Capital
The flow back of profit plus depreciation from a
given project is called
A. Capital recovery

B. Cash flow

C. Economic return

D. Earning value
The profit derived from a project or business enterprise without
consideration of obligations to financial contributions or claims
of other based on profit.

A. Economic Return

B. Yield

C. Earning value

D. Expected yield
The payment for the use of borrowed
money is called
A. Loan

B. maturity value

C. Interest

D. principal
The interest rate at which the present work of the cash
on a project is zero of the interest earned by an
investment
A. Effective rate

B. Nominal rate

C. Rate of return

D. Yield
The ratio of the interest payment to be principal for a given unit
of time and usually expressed as a percentage of the principal.

A. Interest

B. Interest rate

C. Investment

D. All of the above

The true value of interest rate computed by equations
for compound interest for a 1 year period is known as

A. Expected return

B. Interest

C. Nominal interest

D. Effective interest
The intangible item of value from the exclusive right of
a company in a stated region of the country.

A. Market value

B. Book value

C. Goodwill value

D. Franchise value
The recorded current value of an asset is
known as
A. Scrap value

B. Salvage value

C. Book value

D. Present worth
Scrap value of an asset is sometimes
known as
A. Book value

B. Salvage value

C. Replacement value

D. Future value
Sometimes called second hand value
A. Scrap value

B. Salvage value

C. Book value

D. Going value
An intangible value which is actually
operating concern has due to its operation.
A. Book value

B. Fair value

C. Goodwill value

D. Going value
The value which has a disinterested third party, different from
the buyer and seller, will determine in order to establish a price
acceptable to both parties.

A. Market value

B. Goodwill value

C. Fair value

D. Franchise value
A type of annuity where the payments are made at the end of
each payment period starting from the first period.

A. Ordinary annuity

B. Annuity due

C. Deferred annuity

D. Perpetuity
It is a series of equal payments occurring at equal intervals of
time where the first payment is made after several periods, after
the beginning of the payment.

A. Deferred annuity

B. Delayed annuity

C. Progressive annuity

D. Simple annuity
A type of annuity where the payments are made at the
start of each period, beginning from the first period.

A. Ordinary annuity

B. Annuity due

C. Deferred annuity

D. Perpetuity
Which is NOT an essential element of an
ordinary annuity
A. The amounts of all payments are equal.

B. The payments are made at equal interval of

time.

C. The first payment is made at the beginning of

each period.

D. Compound interest is paid on all amounts in the

annuity.
A is a periodic payment and I is the interest rate,
then present worth of a perpetuity =
A. Ai

B. Ain

C. An/i

D. A/i
A mathematical expression also known as the
present value of a n annuity of one called
A. Load factor

B. Demand factor

C. Sinking fund

D. Present worth factor

As applied to a capitalized asset, the distribution of the initial cost by a
periodic changes to operation as in depreciation or the reduction of a debt by
either periodic or irregular prearranged program is called

A. Annuity

B. Capital recovery

C. Annuity factor

D. Amortization
The reduction of the value of an asset due
to constant use and passage of time.
A. Scrap value

B. Depletion

C. Depreciation

D. Book value
A method of computing depreciation in which the annual charge
is a fixed percentage of the depreciation book value at the
beginning of the year to which the depreciation applies

A. Straight line method

B. Sinking fund method

C. SYD method

D. Declining balance method

A method of depreciation whereby the amount to recover is
spread uniformly over the estimated life of the asset in terms of
the periods or units of output.

A. Straight line method

B. Sinking fund method

C. Declining balance method

D. SYD method
Which of the following depreciation methods
cannot have a salvage value of zero?
A. Straight line method

B. Sinking fund method

C. Declining balance method

D. SYD method
A method of depreciation where a fixed sum of money is
regularly deposited at compound interest in a real or imaginary
fund in order to accumulate an amount equal to the total
depreciation of an asset at the end of the asset’s estimated life.
A. Straight line method

B. Sinking fund method

C. Declining balance method

D. SYD method
The function of interest rate and time that determines the
cumulative amount of a sinking fund resulting from specific
periodic deposits.

A. Sinking fund factor

B. Present worth factor

C. Capacity factor

D. Demand factor
The first cost of any property includes
A. The original purchase price and freight and
transportation charges

B. Installation expenses

C. Initial taxes and permits fee

D. All of the above

In SYD method, the sum of years digit is calculated using the
formula with n = number of useful years of the equipment.

A. n(n-1)/2

B. n(n+1)/2

C. n(n+1)

D. n(n-1)
Capitalized cost of any property is equal to
the
A. Annual Cost

B. First cost + interest of the first cost

C. First cost + interest of perpetual maintenance

D. First cost + salvage cost

The lessening of the value of an asset due to the decrease in the
quantity available (referring to the natural resources, coal, oil,
etc.)

A. Depreciation

B. Depletion

C. Inflation

D. Incremental cost
Is the simplest form of a business organization

A. Sole proprietorship

B. Partnership

C. Enterprise

D. Corporation
An association of two or more persons for a
purpose of engaging in a profitable business.
A. Sole proprietorship

B. Enterprise

C. Partnership

D. Corporation
A distinct legal entity which can practically transact any
business transaction which a real person could do.

A. Sole proprietorship

B. Enterprise

C. Partnership

D. Corporation
Double taxation is a disadvantage of which
business organization?
A. Sole proprietorship

B. Partner

C. Corporation

D. Enterprise
Which is not a type of business
organization?
A. Sole proprietorship

B. Corporation

C. Enterprise

D. Partnership
What is the minimum number of incorporators
in order that a corporation be organized?
A. 3

B. 5

C. 10

D. 7
In case of bankruptcy of a partnership,
A. The partners are not liable for the liabilities of the
partnership.

B. The partnership assets (excluding the partners personal

assets) only will be used to pay the liabilities.

C. The partners personal assets are attached to the debt of

the partnership.

D. The partners may sell stock to general additional

capital.
Which is TRUE about partnership?

A. It has a perpetual life.

B. It will be desolved if one of the partners ceases

to be connected with the partnership.

C. It can be handed down from one generation of

partners to another.

D. Its capitalization must be equal for each partner.

Which is true about corporation?
A. It is not best form of organization.

B. The minimum number of incorporators to start a

corporation is three.

C. Its life is dependent on the lives of the

incorporators.

D. The stockholders of the corporation are only

liable to the extent of their investments.
Represent ownership, enjoys certain preferences
than ordinary stock.
A. Authorized capital stock

B. Preferred stock

C. Common stock

D. Incorporator’s stock
Represent the ownership of stockholders who have a residual
claim on the assets of the corporation after all other claims have
been settled.

A. Authorized capital stock

B. Preferred stock

C. Incorporator’s stock

D. Common stock
The amount of company’s profit that the board of
directors of the corporation decides to distribute

A. Dividend

B. Return

C. Share stock

D. Par value
A certificate of indebtness of a corporation usually for a period
not less than 10 years and guaranteed by a mortgage on certain
assets of the corporation.

A. Bond

B. T-bill

C. Preferred stock

D. Common stock
A form of fixed-interest security issued by central or local
government, companies, banks or other institutions. They are
usually a form of long-term security, buy may be
irredeemable, secured or unsecured.
A. Bond

B. T-bill

C. Certificate of deposit

D. All of these
A type of bind where the corporation pledges securities
which it owns(i.e. Stocks, bonds of its subsidiaries).

A. mortgage

B. Registered bond

C. Coupon bond

D. Collateral trust bond

A type of bond which does not have security except a
promise to pay by the issuing corporation.

a. Mortgage bond

b. Registered bond

c. Collateral bond

d. Debenture bond
A type of bond issued jointly by two or
more corporations.
a. Joint bond

b. Debenture bond

c. Registered bond

d. Collateral trust bond

A type of bond whose guaranty is in lien on
railraod equipments.

a. Equipments obligations bond

b. Debenture bond

c. Registered bond

d. Infrastructure bond
If the security of the bond is a mortgage on certain
specified asset of a corporation, this bond is classified
as
a. Registered bond

b. Mortgage bond

c. Coupon bond

d. Joint bond
A type of bond where the corporation’s owner name
are recorded and the interest is paid periodically to the
owners with their asking for it.

a. Registered bond

b. Preferred bond

c. Incorporators bond

d. All of these
Bond to which are attached coupons indicating the
interest due and the date when such interest is to be
paid.

a. Registered bond

b. Coupon bond

c. Mortgage bond

d. Collateral trust bond

An amount of money invested at 12% interest
per annum will double in approximately

a. 4 years

b. 5 years

c. 6 years

d. 7 years
The 72 rule of thumb is used to
determine
a. How many years money will triple

b. How many years money will be double

c. How many years to amass 1 million

d. How many years to quadruple the money

To triple the principal, one must use

a. integration

b. derivatives

c. logarithms

d. Implicit functions
A currency traded in a foreign exchange market for
which the demand is consistently high in relation to its
supply.

a. Money market

b. Hard currency

c. Treasury bill

d. Certificate of deposit
Everything a company owns and which has a money
value is classified as an asset. Which of the following is
classified as an asset

a. Intangible assets

b. Fixed assets

c. Trade investments

d. All of these
Which an example of an intangible
asset?
a. cash

b. furniture

c. Investment in subsidiary companies

d. patents
Land, buildings, plant and machinery
are examples of
a. Currents assets

b. Trade investments

c. Fixed assets

d. Intangible assets
An increase in the value of a capital
asset is called
a. profit

b. Capital gain

c. Capital expenditure

d. Capital stock
The reduction in the money value of a
capital asset is called
a. Capital expenditure

b. Capital loss

c. loss

d. deficit
It is a negotiable claim issued by a
bank in lieu of a term deposit.
a. Time deposit

b. bond

c. Capital gain

d. Certificate of deposit
Any particular raw material or primary product
(e.g. cloth, woll, flour, coffee...) is called

a. utility

b. necessity

c. commodity

d. stock
It denotes the fall in the exchange rate of one currency
in terms of others. The term usually applies to floating
exchange rates.

a. Currency appreciation

b. Currency devaluation

c. Currency float

d. Currency depreciation
The deliberate lowering of the price of a nation’s
currency in terms of the accepted standard (Gold,
american dollar or the british pound)

a. Currency appreciation

b. Currency devaluation

c. Currency float

d. Currency depreciation
The residual value of a company’s assets after all
outside liabilities (shareholders excluded) has been
allowed for.

a. dividend

b. equity

c. return

d. Per value
A saving which takes place because goods are not
available for consumption rather than the consumer
really want to save.

a. Compulsory saving

b. Consumer saving

c. Forced saving

d. All of these
A document that shows proof of legal
ownership of a financial security.
a. bond

b. Bank notes

c. coupon

d. check
Defined as the capacity of commodity
to satisfy human want
a. discount

b. necessity

c. luxuries

d. utility
It is the profit obtained by selling stocks at a
higher price than its original purchase price.

a. debenture

b. goodwill

c. Capital gain

d. Internal rate or return

The quantity of a certain commodity that is offered for
sale at a certain price at a given time and place.

a. demand

b. supply

c. utility

d. market
The quantity of a certain commodity that is bought at
certain price at a given time and place.

a. demand

b. supply

c. market

d. utility
“When free competition exists, the price of a product
will be that value where supply is equal to the
demand”.

a. Law of diminishing return

b. Law of supply

c. Law of demand

d. Law of supply and demand

“When one of the factors or production is fixed in quantity or is
difficult to increase, increasing the other factors of production
will result in a less than proportionate increase in output”.

a. Law of diminishing return

b. Law of supply

c. Law of demand

d. Law of supply and demand

The place where sellers and buyers
come together.
a. Department store

b. market

c. mall

d. Shopping center
GATT stands for

a. General Agreement of Tariff and Trade

b. General Arrangement of Tariff and Trade

c. Global Agreement of Tariff and Trade

d. Global Arrangement of Tariff and Trade

The letter D in the Roman numerals is

a. 50

b. 100

c. 500

d. 1000