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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. A significant reduction in un employment will lead to an increase in _________
a) Inflation
b) Profit
c) Efficiency
d) Cost
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. Which of the factors influences the supply?
a) Technology
b) Weather
c) Prices of related goods
d) All of the above
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. The ratio of the output to input of a physical system is _______
a) Technical efficiency
b) Economic efficiency
c) Efficiency
d) All of the above
8. The ratio of the output to input of a business system is _______
a) Technical efficiency
b) Economic efficiency
c) Efficiency
d) All of the above

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St.Joseph‟s Institute of Technology
St.Joseph‟s Group of Institutions
OMR, Chennai – 600 119
Department of Mechanical Engineering

9. Economic efficiency is also called as _________

a) Stability
b) Productivity
c) Profitability
d) None of the above
10. Which 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. Which of the following are characteristics of B.E.P?
a) There is no loss and no profit to the firm.
b) Total revenue is equal to total cost.
c) Contribution is equal to fixed cost.
d) All of the above.
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. 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
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. Contribution is also known as
a) Contribution margin
b) Net Margin
c) Both a and b
d) None 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

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St.Joseph‟s Institute of Technology
St.Joseph‟s Group of Institutions
OMR, Chennai – 600 119
Department of Mechanical Engineering
17. Which of the following are assumptions for break-even analysis?
A) Elements of cost cannot be divided in different groups.
B) Fixed cost remains certain from zero production to full capacity.
C) Behavior of different costs is linear
D) Selling per price unit remains constant.
a) A, B, C
b) B, C, D
c) A, C, D
d) A, B, D
18. Cost of sales +Profit
a) Factory cost
b) Costs of production
c) Sales
d) Selling price per unit
19. Past cost of an equipment/asset.
a) Marginal Cost
b) Marginal Revenue
c) Sunk Cost
d) Opportunity Cost
20. The cost of producing an additional unit of the product.
a) Marginal Cost
b) Marginal Revenue
c) Sunk Cost
d) Opportunity Cost
21. Which one of the following definitions is correct?
a) The ratio of total debt to shareholder’s equity is called 'debt ratio'Speed
b) The ratio debt-to-total assets is called Debt-to-total assets ratio
c) The ratio of earnings before interest and taxes for a particular reporting period to the amount of
interest charges for the period is called interest coverage ratio
d) All of these
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. If „S‟ is the future capital accumulated in „n‟ years at the rate of interest „I‟ per annum, then
present worth is:
a) S/(1 + i)n
b) S (1 + i)n
c) S (1 + i)1/n
d) None of these
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

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St.Joseph‟s Institute of Technology
St.Joseph‟s Group of Institutions
OMR, Chennai – 600 119
Department of Mechanical Engineering
25. Mr. David deposits Rs 1200 now, Rs 800 two years from now and Rs 1000 five years from now. If
the savings bank's rate of interest in 5%, he will receive an amount of Rs X, 10 years from now,
where „X‟ is Decreased
a) Rs. 3415
b) Rs. 4225
c) Rs. 4413
d) Rs. 4826
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. Earnings per share is the most important ratio forFuel used
a) Share holders
b) Banks
c) Company's management
d) All of these
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 alternatives which are standalone solutions for given situations in engineering involve:Idling
a) A purchase cost (first cost)
b) The anticipated life of the assets
c) The anticipated resalable value (salvage value) and the interest return (rate of return)
d) All of these
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. Keeping in view, the feasibility order of magnitude, the preliminary, conceptual or budget
estimates, are prepared by:
a) Architect/engineer
b) Construction manager
c) Owner himself/herself
d) Construction manager
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. Liquidity ratios are used:
a) To measure a firm’s ability to meet short-cut obligations
b) To compare short term obligations to short-term resources available to meet these obligations

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St.Joseph‟s Institute of Technology
St.Joseph‟s Group of Institutions
OMR, Chennai – 600 119
Department of Mechanical Engineering
c) To obtain much insight into the present cash solvency of the firm and the firm's ability to remain
solvent in the event of adversity
d) All of these
34. Each financial ratio is generally compared by
a) A past ratio calculated from the past financial standard of the firm
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. Pick up the correct statement from the following:
a) Ratio analysis is the procedure of determining and interpreting numerical relationship of various items
of the financial statement
b) All financial ratios are obtained by relating two sets of information contained in a Single financial
statement
c) The relationship between two accounting figures expressed mathematically, is known as a financial
ratio
d) All of these
36. Present worth Annuity (PWA) is generally known as
a) Premium annuities
b) Income annuities
c) Future annuities
d) All of these
37. Pick up the method used for project evaluation and selection in capital budgeting from the
following:
a) Payback period
b) Internal ratio of return
c) Net present worth
d) All of the above
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. Pick up the correct statement from the following:
a) The difference between sales revenue and cost of goods sold, is known as 'Gross Profit'
b) The gross profit percentage is the average profit margin obtained on goods sold
c) The relationship of contribution to sales is known as contribution ratio
d) All of these
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

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St.Joseph‟s Institute of Technology
St.Joseph‟s Group of Institutions
OMR, Chennai – 600 119
Department of Mechanical Engineering
41. In a cash flow series:
a) Uniform gradient signifies that an income or disbursement changes by the same amount in each interest
period
b) Either an increase or decrease in the amount of a cash flow is called the gradient
c) The gradient in the cash flow may be positive or negative
d) All of these
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. What market situation exists where there is only one buyer and only one seller?
a) Monopsony
b) Monopoly
c) Bilateral monopsony
d) Bilateral monopoly
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
b) 360
c) 365
d) 366
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. A uniform series of payment occurring at equal interval of time is called ______.
a) Annuity
b) Amortization
c) Depreciation
d) Bond
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

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St.Joseph‟s Institute of Technology
St.Joseph‟s Group of Institutions
OMR, Chennai – 600 119
Department of Mechanical Engineering
49. In what method of computing depreciation where it assumes that the loss in value is directly
proportional to the age of the equipment or asset?
a) Straight line method
b) Sinking fund method
c) Sum-of-year digit method
d) Declining balance method
50. Salvage value is sometimes known as ______.
a) Scrap value
b) Going value
c) Junk value
d) Second-hand value
51. Net present worth for an alternative is equal to ____________.
a) Present worth (benefits)
b) Present worth (cost)
c) Present worth (benefits) - Present worth (cost)
d) Present worth (cost) - Present worth (benefits
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. A company must install one of two production machines that have identical costs. What criterion
should be selected to determine which machine to install as per present worth analysis?
a) Choose the machine from the closest vendor.
b) Choose the machine with the higher PW (benefits).
c) Choose the machine with the lower PW (costs).
d) Choose either machine
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. The present worth of a constant annual cost over an analysis period that extends to infinite is
called ____________.
a) Capitalized cost
b) Net cost
c) First cost
d) None of 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

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St.Joseph‟s Institute of Technology
St.Joseph‟s Group of Institutions
OMR, Chennai – 600 119
Department of Mechanical Engineering
57. The cash flows method, utilized by the internal rate of return and net present value method are
a) Future cash flows
b) Lean cash flows
c) Discounted cash flow
d) Vertical cash flows
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. Profit for the objective of calculating a ratio may be taken as
a) Profit before tax but after interest
b) Profit before interest and tax
c) Profit after interest and tax
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. Maintenance consist of the following action(s)
a) Replace of component
b) Repair of component
c) Service of component
d) All of the above
62. The following is not a classification of maintenance
a) Corrective maintenance
b) Timely maintenance
c) Scheduled maintenance
d) Preventive maintenance
63. Total Productive maintenance (TPM) approach has the potential of providing almost a seamless
integration between
a) Production and Quality
b) Quality and Maintenance
c) Production and Maintenance
d) All 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. Continually monitoring performance for signs of need of maintenance is known as:
a) Preventive maintenance (PM)
b) Run to breakdown (RTB)
c) Condition-based maintenance (CBM)
d) All of the above

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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. The number of failures over a period of time is called:
a) The mean time between failures
b) The average failure point
c) The failure rate
d) None of the above
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) 1 : 1.27 men
b) 1 : 2.17 men
c) 1 : 2.37 men
d) 1 : 3.17 men
70. Preventive maintenance and its application is an expensive process.
a) True
b) False
71. Belt of an electric motor is broken, it needs
a) Corrective maintenance
b) Scheduled maintenance
c) Preventive maintenance
d) Timely maintenance
72. A systematic approach for maintenance is
a) Problem – Cause – Diagnosis – Rectification
b) Problem– Diagnosis – Cause – Rectification
c) Problem – Measure – Diagnosis – Rectification
d) Problem– Diagnosis – Measure – Rectification
73. Which of the following is not a characteristic of an asset?
a) It will bring future economic benefits to the business.
b) It is owned by the business.
c) It can be held by the business for a short period of time.
d) It must have a physical substance.
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. Suppose velocity is 3, real output is 6000, and the price level is 20. What is the level of nominal
money stock in this economy?
a) 100

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St.Joseph‟s Institute of Technology
St.Joseph‟s Group of Institutions
OMR, Chennai – 600 119
Department of Mechanical Engineering
b) 40,000
c) 2,000
d) 1,20,000
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. Which of the following is true about the velocity of money?
a) All of the below.
b) Velocity is measured by the ratio of nominal GDP to the nominal money stock.
c) Velocity decreases as nominal money stock increases.
d) Velocity measures how often the money stock turns over each period.
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. When asset’s annual operating and maintenance are always increasing while salvage values remain
constant (over the life of asset), the economic life of the asset is
a) Shortest possible life
b) Longest possible life
c) Zero
d) Can’t be said
80. Which one is not a type of FMECA?
a) System
b) Design
c) Process
d) Manufacture
81. Inflation is the state in which
a) The value of money decreases
b) The value of money increases
c) The value of the money increases first and then decreases
d) The value of money decreases first and increases later
82. How inflation affects the price of the commodities?
a) Price of the commodities decreases
b) Price of the commodities increases
c) No effect
d) First the price decreases later on increases

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St.Joseph‟s Institute of Technology
St.Joseph‟s Group of Institutions
OMR, Chennai – 600 119
Department of Mechanical Engineering
83. Which is the most effective quantitative method to control inflation in the economy?
a) Bank rate policy
b) Selective credit control
c) Cash reserve ratio
d) Both (a) and (b)
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. Inflation is measured on the basis of:
a) Wholesale price index
b) Consumer price index
c) Marshall’s index
d) All of these
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 main object of providing depreciation is
a) To calculate true profit. (T)
b) To show true financial position.
c) To reduce tax.
d) To provide funds for replacement.
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. Under the fixed installment method of providing depreciation it is calculated on:
a) Original cost (T)
b) on balance amount
c) On scrap value
d) None of them

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St.Joseph‟s Institute of Technology
St.Joseph‟s Group of Institutions
OMR, Chennai – 600 119
Department of Mechanical Engineering
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

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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.d 6.b 7.a 8.b 9.b 10.d

11.d 12.a 13.a 14.c 15.a 16.b 17.b 18.c 19.c 20.a

21.d 22.c 23.a 24.d 25.c 26.d 27.d 28.a 29.d 30.c

31.c 32.a 33.d 34.d 35.d 36.d 37.d 38.d 39.d 40.c

41. d 42 .d 43.c 44.d 45.b 46 .a 47.a 48 .c 49 .a 50.d

51.c 52.a 53.b 54.d 55.a 56.b 57.c 58.a 59.d 60.c

61.d 62.b 63.c 64.b 65.c 66.a 67.c 68.d 69.c 70.a

71.a 72.a 73.d 74.d 75.b 76.d 77.a 78.a 79.a 80.d

81.a 82.b 83.a 84.a 85.c 86.b 87.a 88.b 89.b 90.a

91.b 92.a 93.c 94.b 95.b 96.a 97.a 98.b 99.c 100.b

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