--
ENGINEERING
ECONOMIC ANALYSIS
SOLUTION MANUAL |
COMPLETE SOLUTION
MANUAL |
GUARANTEED PASS |
FINE TUNED SOLUTION
MANUAL PREP
--
,--
Chapter 1: Making Economic Decisions
1-1
A survey of students answering this question indicated that they thought about 40%
of their decisions were conscious decisions.
1-2
The choice of an engine has important money consequences so
(a) Yes.
would be suitable for engineering economic analysis.
Important economic- and social- consequences. Some might
(b) Yes.
argue the social consequences are more important than the
economics.
Probably there are a variety of considerations much more
(c) ?
important than the economics.
(d) No. Picking a career on an economic basis sounds terrible.
(e) No. Picking a wife on an economic basis sounds even worse.
1-3
Of the three alternatives, the $150,000 investment problem is most suitable for
economic analysis. There is not enough data to figure out how to proceed, but if the
‘desirable interest rate' were 9%, then foregoing it for one week would mean a loss of:
1
/52 (0.09) = 0.0017 = 0.17%
immediately. It would take over a year at 0.15% more to equal the 0.17% foregone now.
The chocolate bar problem is suitable for economic analysis. Compared to the
investment problem it is, of course, trivial.
Joe's problem is a real problem with serious economic consequences. The difficulty
may be in figuring out what one gains if he pays for the fender damage, instead of
having the insurance company pay for it.
1-4
Gambling, the stock market, drilling for oil, hunting for buried treasure—there are sure
to be a lot of interesting answers. Note that if you could double your money every day,
then:
2x ($300) = $1,000,000
and x is less than 12 days.
--
,--
1-5
Maybe their stock market ‘systems' don't work!
1-6
It may look simple to the owner because he is not the one losing a job. For the
three machinists it represents a major event with major consequences.
1-7
For most high school seniors there probably are only a limited number of colleges
and universities that are feasible alternatives. Nevertheless, it is still a complex
problem.
1-8
It really is not an economic problem solely — it is a complex problem.
1-9
Since it takes time and effort to go to the bookstore, the minimum number of pads
might be related to the smallest saving worth bothering about. The maximum
number of pads might be the quantity needed over a reasonable period of time, like
the rest of the academic year.
1-10
While there might be a lot of disagreement on the ‘correct' answer, only automobile
insurance represents a substantial amount of money and a situation where money
might be the primary basis for choosing between alternatives.
1-11
The overall problems are all complex. The student will have a hard time coming
up with examples that are truly simple or intermediate until he/she breaks them
into smaller and smaller sub-problems.
1-12
These questions will create disagreement. None of the situations represents
rational decision-making.
Choosing the same career as a friend might be OK, but it doesn't seem too
rational. Jill didn't consider all the alternatives.
Don thought he was minimizing cost, but it didn't work. Maybe rational
decision-making says one should buy better tools that will last.
--
, --
1-13
Possible objectives for NASA can be stated in general terms of space exploration or
the generation of knowledge or they can be stated in very concrete terms. President
Kennedy used the latter approach with a year for landing a man on the moon to
inspire employees. Thus the following objectives as examples are concrete. No year
is specified here, because unlike President Kennedy we do not know what dates may
be achievable.
Land a man safely on Mars and return him to earth by .
Establish a colony on the moon by .
Establish a permanent space station by .
Support private sector tourism in space by .
Maximize fundamental knowledge about science through x probes per year or for $y
per year.
Maximize applied knowledge about supporting man's activities in space through x
probes per year or for $y per year.
Choosing among these objectives involves technical decisions (some objectives may
be prerequisites for others), political decisions (balance between science and
applied knowledge for man's activities), and economic decisions (how many dollars
per year can be allocated to NASA).
However, our favorite is a colony on the moon, because a colony is intended to
be permanent and it would represent a new frontier for human ingenuity and
opportunity. Evaluation of alternatives would focus on costs, uncertainties, and
schedules. Estimates of these would rely on NASA's historical experience, expert
judgment, and some of the estimating tools discussed in Chapter 2.
1-14
This is a challenging question. One approach might be:
(a) Find out what percentage of the population is left-handed.
(b) What is the population of the selected hometown?
(c) Next, market research might be required. With some specific scissors (quality
and price) in mind, ask a random sample of people if they would purchase the
scissors. Study the responses of both left-handed and right-handed people.
(d) With only two hours available, this is probably all the information one could
collect. From the data, make an estimate.
A different approach might be to assume that the people interested in left handed
scissors in the future will be about the same as the number who bought them in the
past.
(a) Telephone several sewing and department stores in the area. Ask two questions:
(i) How many pairs of scissors have you sold in one year (or six months or?).
(ii) What is the ratio of sales of left-handed scissors to regular scissor?
(b) From the data in (a), estimate the future demand for left-handed scissors.
--
ENGINEERING
ECONOMIC ANALYSIS
SOLUTION MANUAL |
COMPLETE SOLUTION
MANUAL |
GUARANTEED PASS |
FINE TUNED SOLUTION
MANUAL PREP
--
,--
Chapter 1: Making Economic Decisions
1-1
A survey of students answering this question indicated that they thought about 40%
of their decisions were conscious decisions.
1-2
The choice of an engine has important money consequences so
(a) Yes.
would be suitable for engineering economic analysis.
Important economic- and social- consequences. Some might
(b) Yes.
argue the social consequences are more important than the
economics.
Probably there are a variety of considerations much more
(c) ?
important than the economics.
(d) No. Picking a career on an economic basis sounds terrible.
(e) No. Picking a wife on an economic basis sounds even worse.
1-3
Of the three alternatives, the $150,000 investment problem is most suitable for
economic analysis. There is not enough data to figure out how to proceed, but if the
‘desirable interest rate' were 9%, then foregoing it for one week would mean a loss of:
1
/52 (0.09) = 0.0017 = 0.17%
immediately. It would take over a year at 0.15% more to equal the 0.17% foregone now.
The chocolate bar problem is suitable for economic analysis. Compared to the
investment problem it is, of course, trivial.
Joe's problem is a real problem with serious economic consequences. The difficulty
may be in figuring out what one gains if he pays for the fender damage, instead of
having the insurance company pay for it.
1-4
Gambling, the stock market, drilling for oil, hunting for buried treasure—there are sure
to be a lot of interesting answers. Note that if you could double your money every day,
then:
2x ($300) = $1,000,000
and x is less than 12 days.
--
,--
1-5
Maybe their stock market ‘systems' don't work!
1-6
It may look simple to the owner because he is not the one losing a job. For the
three machinists it represents a major event with major consequences.
1-7
For most high school seniors there probably are only a limited number of colleges
and universities that are feasible alternatives. Nevertheless, it is still a complex
problem.
1-8
It really is not an economic problem solely — it is a complex problem.
1-9
Since it takes time and effort to go to the bookstore, the minimum number of pads
might be related to the smallest saving worth bothering about. The maximum
number of pads might be the quantity needed over a reasonable period of time, like
the rest of the academic year.
1-10
While there might be a lot of disagreement on the ‘correct' answer, only automobile
insurance represents a substantial amount of money and a situation where money
might be the primary basis for choosing between alternatives.
1-11
The overall problems are all complex. The student will have a hard time coming
up with examples that are truly simple or intermediate until he/she breaks them
into smaller and smaller sub-problems.
1-12
These questions will create disagreement. None of the situations represents
rational decision-making.
Choosing the same career as a friend might be OK, but it doesn't seem too
rational. Jill didn't consider all the alternatives.
Don thought he was minimizing cost, but it didn't work. Maybe rational
decision-making says one should buy better tools that will last.
--
, --
1-13
Possible objectives for NASA can be stated in general terms of space exploration or
the generation of knowledge or they can be stated in very concrete terms. President
Kennedy used the latter approach with a year for landing a man on the moon to
inspire employees. Thus the following objectives as examples are concrete. No year
is specified here, because unlike President Kennedy we do not know what dates may
be achievable.
Land a man safely on Mars and return him to earth by .
Establish a colony on the moon by .
Establish a permanent space station by .
Support private sector tourism in space by .
Maximize fundamental knowledge about science through x probes per year or for $y
per year.
Maximize applied knowledge about supporting man's activities in space through x
probes per year or for $y per year.
Choosing among these objectives involves technical decisions (some objectives may
be prerequisites for others), political decisions (balance between science and
applied knowledge for man's activities), and economic decisions (how many dollars
per year can be allocated to NASA).
However, our favorite is a colony on the moon, because a colony is intended to
be permanent and it would represent a new frontier for human ingenuity and
opportunity. Evaluation of alternatives would focus on costs, uncertainties, and
schedules. Estimates of these would rely on NASA's historical experience, expert
judgment, and some of the estimating tools discussed in Chapter 2.
1-14
This is a challenging question. One approach might be:
(a) Find out what percentage of the population is left-handed.
(b) What is the population of the selected hometown?
(c) Next, market research might be required. With some specific scissors (quality
and price) in mind, ask a random sample of people if they would purchase the
scissors. Study the responses of both left-handed and right-handed people.
(d) With only two hours available, this is probably all the information one could
collect. From the data, make an estimate.
A different approach might be to assume that the people interested in left handed
scissors in the future will be about the same as the number who bought them in the
past.
(a) Telephone several sewing and department stores in the area. Ask two questions:
(i) How many pairs of scissors have you sold in one year (or six months or?).
(ii) What is the ratio of sales of left-handed scissors to regular scissor?
(b) From the data in (a), estimate the future demand for left-handed scissors.
--
