Economic decision-making

Question 1

What is economic decision-making?

Answer 1

It refers to the process of selecting alternatives that maximize utility, minimize costs, and achieve objectives in an economy.

Question 2

Who can make economic decisions?

Answer 2

Individuals, households, businesses, governments, or other economic agents.

Question 3

What are the steps in the economic decision-making process?

Answer 3

Recognize and define the nature of the decision situation.
Identify alternatives.
Choose the best alternative and implement it.

Question 4

What are some reasons for making effective decisions?

Answer 4

To optimize factors such as profits, sales, employee welfare, or to minimize losses, expenses, and employee turnover.

Question 5

What is scarcity?

Answer 5

The concept that resources are limited, but wants and needs are unlimited.

Question 6

What is opportunity cost?

Answer 6

The cost of forgoing the next best alternative when making a decision.

Question 7

What is marginal analysis?

Answer 7

Evaluating the additional benefits and costs of a small change in the level of an activity.

Question 8

What are incentives?

Answer 8

Factors that influence behavior, such as rewards or penalties.

Question 9

What are trade-offs?

Answer 9

Balancing competing objectives by giving up one thing to obtain another.

Question 10

What is rationality in economic decision-making?

Answer 10

The assumption that decision-makers act in their own self-interest, aiming to maximize utility or well-being.

Question 11

What are programmed decisions?

Answer 11

Structured decisions that recur frequently, such as operational procedures.

Question 12

What are nonprogrammed decisions?

Answer 12

Unstructured decisions that occur less frequently, often made by top management and involve strategy or design.

Question 13

What is the main challenge for ABC Manufacturing Inc.?

Answer 13

Deciding whether to expand domestically or internationally.

Question 14

What are the two potential locations for expansion?

Answer 14

Domestic expansion in another state or international expansion in a Southeast Asian nation.

Question 15

What are the key factors to consider for expansion decisions?

Answer 15

Labor Costs
Market Potential
Regulatory Environment
Supply Chain Management
Political and Economic Stability
Brand Reputation and Customer Perception
Financial Viability

Question 16

What are the steps in the rational decision-making process?

Answer 16

Recognize the problem.
Define the goal or objective.
Collect relevant data.
Identify feasible alternatives.
Select the criterion for choosing the best alternative.
Predict the outcomes for each alternative.
Choose the best alternative.
Audit the results.

Question 17

What areas are impacted by engineering economic decisions?

Answer 17

Planning, investment, marketing, profit, and manufacturing.

Question 18

Why is economic decision making important for engineering projects?

Answer 18

It helps control costs, manage risks, evaluate ROI, conduct life cycle cost analysis, and ensure project feasibility.

Question 19

What factors influence economic decisions in engineering projects?

Answer 19

Cost-Benefit Analysis
Budget Constraints
Technological Feasibility
Resource Availability
Life Cycle Costs
Market Demand and Competition
Regulatory and Environmental Considerations
Risk Assessment
Time Constraints
Government Policies and Incentives
Stakeholder Expectations
Scalability and Flexibility

Question 20

What is an example of a rational decision-making scenario?

Answer 20

Buying a car (Audi vs. BMW) by defining objectives, collecting data, identifying alternatives, and choosing the best option.