Which of the following must be true about a signal that is used to reveal private information in order for the signal to be effective? It must be:

Question

Quizplus · Accepted Answer

For a signal to be effective in revealing private information, it must be costly to the signalling party but less costly to the party with the higher-quality product. This is because if the signal is too easy or cheap to produce, both parties may use it, and it will not be an effective way to distinguish between products. If the signal is only used by the party with the superior product, it becomes a reliable indicator of quality.

Which of the Following Must Be True About a Signal