The Economic Entity Assumption Requires That the Activities

question 86

Multiple Choice

The economic entity assumption requires that the activities

• A) of different entities can be combined if all the entities are corporations.
• B) must be reported to the Securities and Exchange Commission.
• C) of a sole proprietorship cannot be distinguished from the personal economic events of its owners.
• D) of an entity be kept separate from the activities of its owner.

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Definitions:

Profit

The financial gain realized when the amount of revenue gained from a business activity exceeds the expenses, costs, and taxes needed to sustain the activity.

Marginal Revenue

The additional income gained from selling one more unit of a good or service.

Total Cost

The sum of fixed costs and variable costs incurred by a business in producing a particular level of output.

Industry Equilibrium Price

The price at which the total quantity demanded by consumers equals the total quantity supplied by firms in an industry.