GEAS: F01-05.

ENGINEERING ECONOMICS (500) topic 01-05

ASSESSMENT 02
Name: ________________________________________ Score: ____________________________
Instruction: choose the letter of the correct answer and shade [❦] the corresponding letter on the given answers sheet. Pls mark
you answer legibly using black or blue ink pen.

Money–Time Relationship and Equivalence [Link] method is most affected by personal bias?
1. The concept that money has different values at different times is called A. Statistical method B. Survey method
A. Inflation B. Time value of money C. Experimental method D. Guess method
C. Interest rate D. Depreciation [Link] methodological issue arises when an economic model omits a relevant
2. Compound interest is interest calculated on variable that affects both dependent and independent variables?
A. Principal only B. Interest only A. Multicollinearity B. Endogeneity
C. Principal plus accumulated interest D. Time value only C. Heteroskedasticity D. Autocorrelation
3. The number of compounding periods is represented by [Link] economics, a structural model is primarily used to:
A. P B. F C. n D. i A. Describe historical data B. Capture underlying causal mechanisms
4. Which factor converts present value to future value? C. Eliminate random error D. Simplify statistical computation
A. (P/F) B. (F/P) C. (A/P) D. (P/A) [Link] estimation problem arises when the variance of error terms is not constant
5. The value of money decreases over time mainly due to across observations?
A. Interest B. Inflation C. Saving D. Investment A. Autocorrelation B. Multicollinearity
6. A cash inflow is usually represented by an arrow pointing C. Heteroskedasticity D. Endogeneity
A. Downward B. Upward C. Sideways D. Diagonal 34.A robustness check in economic research is conducted to:
7. Money-time relationship is fundamental to A. Increase model complexity
A. Physics B. Chemistry B. Verify stability of results under alternative assumptions
C. Engineering economy D. Biology C. Reduce data requirements D. Improve ethical compliance
8. The relationship between money and time assumes interest is [Link] criterion is essential for assessing the causal credibility of an economic study?
A. Negative B. Zero C. Earned D. Ignored A. Large sample size alone B. Clear identification strategy
9. Discounting moves money C. Use of secondary data D. Normative consistency
A. Forward in time B. Backward in time [Link] cost-effectiveness analysis, outcomes are typically measured in terms of:
C. Sideways in time D. Randomly A. Monetary value only B. Utility maximization
[Link] cash flow diagrams, time is usually shown on the C. Physical or natural units D. Market prices
A. Vertical axis B. Horizontal axis [Link] concept of bounded rationality implies that economic agents:
C. Curved axis D. Random axis A. Always maximize utility B. Have unlimited information
11. If ₱10,000 is invested at 12% compounded quarterly, what is its value after 3 years? C. Make decisions under cognitive constraints D. Act randomly
A. ₱14,900 B. ₱14,985 C. ₱14,025 D. ₱15,120 [Link] primary purpose of peer review in economic research is to:
[Link] compounding method yields the highest future value for the same nominal A. Increase publication speed B. Ensure methodological rigor and credibility
rate? C. Promote theoretical uniformity D. Eliminate competing ideas
A. Annual B. Semi-annualC. Quarterly D. Continuous [Link] indicator best reflects income distribution within an economy?
[Link] happens to present worth when interest rate increases (all else constant)? A. GDP per capita B. Consumer price index
A. Increases B. Decreases C. Gini coefficient D. Inflation rate
C. Remains unchanged D. Becomes zero [Link] methodological approach prioritizes empirical observation over theoretical
[Link] present worth of ₱1 received every year forever at 5% interest is: abstraction?
A. ₱10 B. ₱15 C. ₱20 D. ₱25 A. Deductive approach B. Inductive approach
[Link] zero interest rate, money equivalence implies that: C. Normative approach D. Formalist approach
A. Future money is worth less
B. Present money is worth more Decisions Under Certainty
C. All cash flows are numerically equal regardless of time [Link] making under certainty means that:
D. Compounding has maximum effect A. Outcomes are completely unknown B. Probabilities of outcomes are known
16.A sinking fund is primarily used to: C. Outcomes of each alternative are known D. Outcomes depend on chance events
A. Accumulate future capital B. Compute present worth [Link] decision theory, certainty implies:
C. Measure depreciation D. Reduce taxes A. One possible state of nature B. Many states of nature
[Link] equivalence is always defined with respect to: C. Unknown states of nature D. Random states of nature
A. Time only B. Money only [Link] under certainty are commonly applied in:
C. Interest rate and time D. Cash flow amount only A. Gambling B. Stock markets
[Link] i = 0, which factor becomes undefined? C. Routine operational problems D. Weather forecasting
A. F/P B. P/F C. A/P D. P/A 44.A company choosing a machine with known costs and output illustrates:
[Link] of the following is NOT a basic interest factor? A. Risk B. Uncertainty C. Certainty D. Conflict
A. P/F B. F/A C. A/G D. F/G [Link]-based decisions are most suitable for:
[Link] factor converts an arithmetic gradient to present worth? A. Strategic planning B. Long-term forecasting
A. P/G B. A/G C. F/G D. G/P C. Well-structured problems D. Unstructured problems
46.A deterministic model is commonly used in:
Basic Economy Study Methods A. Risk situations B. Uncertain situations
[Link] is the primary purpose of studying economics? C. Certainty situations D. Competitive situations
A. To predict weather B. To understand how resources are used [Link] under certainty is also known as:
C. To study human anatomy D. To design buildings A. Stochastic decision B. Deterministic decision
[Link] tool is commonly used to analyze economic data? C. Random decision D. Subjective decision
A. Microscope B. CalculatorC. StethoscopeD. Thermometer [Link] exists when there is:
[Link] method studies economics using cause-and-effect relationships? A. More than one state of nature B. Exactly one known state of nature
A. Scientific method B. Guessing method C. Unknown state of nature D. Random state of nature
C. Opinion method D. Trial-and-error 49.A deterministic payoff means the outcome is:
[Link] representation helps economists to: A. Random B. Probabilistic
A. Hide information B. Visualize trends C. Known in advance D. Estimated
C. Reduce accuracy D. Increase errors [Link] concept is closely related to certainty?
[Link] economic study method uses numerical data? A. Risk analysis B. Determinism
A. Qualitative method B. Theoretical method C. Uncertainty analysis D. Probability theory
C. Quantitative method D. Descriptive method
[Link] economic theory is best described as a: [Link] decision theory, a decision under certainty assumes that:
A. Law without proof B. Systematic explanation A. Outcomes have known probabilities
C. Personal opinion D. Random idea B. All possible outcomes are unknown
[Link] of the following is a limitation of economic study methods? C. The decision-maker knows exactly which outcome will occur
A. Lack of data B. Human behavior variability D. Outcomes depend on random events
C. Mathematical tools D. Use of statistics [Link] decisions under certainty, the decision variable is selected based on:
[Link] of the following improves accuracy in economic studies? A. Likelihood of outcomes B. Known payoffs only
A. Proper data collection B. Guesswork C. Risk preferences D. Probability-weighted outcomes
C. Assumptions only D. Personal bias [Link] engineering economics, decisions under certainty typically ignore:
[Link] conclusions should be: A. Time value of money B. Cash flow analysis
A. Biased B. Based on evidence C. Risk and variability D. Cost estimation
C. Emotional D. Random [Link] tool is LEAST appropriate for decisions under certainty?
A. Linear programming B. Cost minimization
C. Decision trees with probabilities D. Break-even analysis
[Link] main advantage of decisions under certainty is that they: [Link] of the following increases objective risk?
A. Handle complex uncertainty B. Reduce computational effort A. Better information B. Higher probability of loss
C. Capture risk attitudes D. Reflect real-world randomness C. Improved controls D. Reduced uncertainty
[Link] concept distinguishes certainty from risk? [Link] concept explains why people prefer avoiding losses to acquiring gains?
A. Number of alternatives B. Knowledge of probabilities A. Risk neutrality B. Utility maximization
C. Knowledge of outcomes D. Use of optimization C. Loss aversion D. Expected value
[Link] all variables are controllable and predictable, decision-making is:
A. Risk-based B. Uncertainty-based Decisions Admitting Uncertainty
C. Certainty-based D. Probabilistic [Link] decision-making under uncertainty, probabilities of states of nature are:
[Link] under certainty are most appropriate when: A. Known and equal B. Known but unequal
A. Market demand fluctuates B. Outcomes are deterministic C. Unknown D. Always subjective
C. Future states are unknown D. Probabilities must be assigned [Link] the Hurwicz criterion, the coefficient of optimism represents the:
[Link] certainty, the role of the decision-maker is primarily to: A. Probability of success B. Level of pessimism
A. Estimate probabilities B. Analyze random events C. Weight given to the best outcome D. Weight given to regret
C. Compare known outcomes D. Reduce uncertainty [Link] is defined as the difference between:
[Link] decision-making is inappropriate when: A. Cost and revenue B. Expected and actual payoff
A. Costs are fixed B. Demand is unpredictable C. Best possible payoff & actual payoff D. Maximum and minimum payoff
C. Outcomes are known D. Constraints are defined 84.A decision-maker who focuses on worst-case scenarios uses the:
A. Maximax criterion B. Laplace criterion
Decisions Recognizing Risks C. Maximin criterion D. Hurwicz criterion
[Link] in decision-making refers to: [Link] Maximax criterion ignores:
A. A guaranteed outcome B. An uncertain outcome with known probabilities A. Best outcomes B. Worst outcomes
C. A situation with no alternatives D. A fixed result C. Average outcomes D. All outcomes
[Link] decision-making, risk occurs when: [Link] Hurwicz criterion reduces to Maximin when the coefficient of optimism is:
A. Outcomes are fully known B. Outcomes are partly known A. 1 B. 0.75 C. 0.5 D. 0
C. There is only one option D. No data is available 87.A major limitation of the Maximin criterion is that it:
63.A risky decision usually involves: A. Overemphasizes best outcomes B. Ignores probabilities
A. One sure result B. No alternatives C. Ignores potentially high gains D. Requires large data sets
C. Several possible outcomes D. Fixed consequences 88.A dominated alternative should be:
[Link] recognizing risks, probabilities are used to: A. Selected immediately B. Analyzed further
A. Eliminate choices B. Measure likelihood of outcomes C. Eliminated from consideration D. Assigned probabilities
C. Avoid thinking D. Ensure certainty [Link] criterion tends to produce moderate decisions?
[Link] in decisions usually involves: A. Maximax B. Maximin C. Hurwicz D. Dominance
A. No uncertainty B. Known alternatives with uncertain results [Link] uncertainty analysis, the choice of criterion mainly depends on the decision-
C. Only one choice D. Complete information maker’s:
[Link] term refers to the chance that an event will occur? A. Mathematical skills B. Attitude toward risk and optimism
A. Risk B. Probability C. Loss D. Gain C. Budget constraints D. Data availability
[Link] of the following best describes risk in daily life? [Link] made under uncertainty are characterized by:
A. Doing homework B. Riding a motorcycle without a helmet A) Known outcomes B) Unknown probabilities
C. Drinking milk D. Sleeping early C) Guaranteed results D) Fixed alternatives
[Link] main purpose of recognizing risks is to: [Link] maximin criterion assumes the decision-maker is:
A. Avoid thinking B. Improve decision quality A) Optimistic B) Risk-averse
C. Guarantee success D. Eliminate choices C) Ignorant of consequences D) Neutral
[Link] of the following is least risky? [Link] decision-making under uncertainty, states of nature refer to:
A. Gambling money B. Skydiving A) Possible outcomes beyond the decision-maker’s control
C. Saving money in a bank D. Speculative investing B) Types of decision alternatives
[Link] risks helps in choosing options that: C) Fixed profit values
A. Have no uncertainty B. Balance risk and reward D) Investment costs
C. Eliminate choices D. Avoid analysis [Link] is:
[Link] decision theory, risk is best defined as a situation where: A) The difference between actual and best payoff for a state
A. Outcomes are unknown and probabilities cannot be assigned B) Total profit
B. Outcomes are known with certainty C) Cost of investment
C. Outcomes are uncertain but probabilities are known D) Probability of success
D. Only losses are possible [Link] is the safest approach under uncertainty?
[Link] recognition primarily involves: A) Maximin B) Maximax
A. Eliminating uncertainty B. Identifying possible negative outcomes C) Random selection D) Ignoring states of nature
C. Maximizing expected profit D. Ignoring low-probability events [Link]-making under uncertainty differs from risk because:
[Link] perception in decision-making is often influenced by: A) Probabilities are unknown B) Outcomes are certain
A. Only numerical probabilities B. Emotional and psychological factors C) Maximization is impossible D) No alternatives exist
C. Guaranteed outcomes D. Mathematical models alone [Link]-making under uncertainty often requires:
[Link] bias leads decision-makers to underestimate risks they believe they can A) Judgment and experience B) Exact probabilities
control? C) Precise forecasts D) Fixed outcomes
A. Availability bias B. Overconfidence bias [Link] a decision table has 3 alternatives and 4 states of nature, how many payoff entries
C. Anchoring bias D. Confirmation bias are there?
[Link] factor increases perceived risk even when actual probabilities are low? A) 7 B) 12 C) 9 D) 10
A. Familiarity B. Voluntary exposure [Link] minimax criterion:
C. Catastrophic potential D. Repeated experience A) Minimizes maximum loss B) Maximizes maximum gain
[Link] concept of “fat tails” in risk analysis refers to: C) Ignores loss D) Assigns equal probabilities
A. Frequent small losses B. Predictable outcomes 100. In maximin approach, the decision-maker:
C. Extreme events with low probability D. Guaranteed failures A) Chooses alternative with best worst-case payoff
77.A decision involving known probabilities but unknown outcomes is considered: B) Chooses alternative with highest possible payoff
A. Certain B. Risk-free C. Risky D. Ambiguous C) Chooses alternative randomly
[Link] tolerance reflects a decision-maker’s: D) Chooses alternative with lowest regret
A. Ability to calculate probabilities B. Willingness to accept risk
C. Level of uncertainty D. Expected payoff