An Equitable or Constructive Obligation Arises When

question 5

Multiple Choice

An equitable or constructive obligation arises when:

• A) Social or moral sanctions or custom leaves the entity no realistic alternative other than to make a sacrifice of future benefits.
• B) Management makes a discretionary decision to make a future sacrifice of economic benefits.
• C) Management communicates its decision to commit to the future sacrifice of economic benefits to the parties concerned.
• D) Social or moral sanctions or custom leaves the entity no realistic alternative other than to make a sacrifice of future benefits and management communicates its decision to commit to the future sacrifice of economic benefits to the parties concerned.

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Definitions:

Rationing Function

The ability of market prices to distribute scarce goods and services among consumers based on willingness and ability to pay.

Marginal Utility

Marginal utility is the additional satisfaction or benefit gained from consuming one more unit of a good or service, which tends to decrease as more units are consumed.

Individual Demand

This refers to the quantity of a good or service that a single consumer is willing and able to purchase at various prices, holding other factors constant.

Normal Good

A type of good for which demand increases when income increases, and falls when income decreases, but price remains constant.