Final answer:
The incorrect statement among the principles of engineering economics is that marginal revenue must not exceed marginal cost to justify production. In reality, maximizing profit involves producing until marginal revenue exceeds marginal cost. Other principles discuss the time value of money, the risk-return relationship, and the focus on differences when comparing alternatives.
Step-by-step explanation:
The statement "marginal revenue must not exceed marginal cost to justify any production" is not one of the four fundamental principles of engineering economics. In engineering economics, it is generally accepted that production should be increased as long as the marginal revenue exceeds the marginal cost to maximize profit.
This is based on the concept that firms operate to increase their profits by comparing the additional revenue generated by selling one more unit of a good or service (marginal revenue) with the additional cost of producing that unit (marginal cost). When marginal costs exceed marginal revenues, it indicates that increasing production would lead to a decrease in profits.
Other fundamental principles include the time value of money, which states that "receiving a dollar today is worth more than a dollar received in the future," and the relationship between risk and return, which suggests "to expect a higher return on investment, you need to take a higher risk." Additionally, the principle that advises, "when you are comparing different alternatives, you must focus only on the differences in alternatives," emphasizes the importance of marginal analysis and disregarding sunk costs.