The Economic Entity Assumption

question 10

Multiple Choice

The economic entity assumption

• A) is inapplicable to unincorporated businesses.
• B) recognizes the legal aspects of business organizations.
• C) requires periodic income measurement.
• D) is applicable to all forms of business organizations.

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Definitions:

Perfect Information

A situation in which all participants have access to all relevant information in a market or decision-making situation.

Prior Probabilities

The probabilities of possible outcomes based on existing knowledge before the arrival of new evidence.

Perfect Information

A state in which all participants in an economic market have complete and instantaneous knowledge of all market aspects that affect their transactions.

Expected Opportunity Loss

The potential loss in value for not choosing the best course of action in decision-making under uncertainty.