A signal only works when:
A)the high quality types acquire the signal at higher cost than the low quality types.
B)the low quality types can also use the signal.
C)the high quality types acquire the signal at lower cost than the low quality types.
D)the high quality types acquire the signal at a high cost.

Question

Quizplus · Accepted Answer

The correct answer is C because in signaling theory, for a signal to be effective in differentiating between high and low quality types (e.g., in job markets, products), it must be the case that the signal is less costly for high quality types to acquire than it is for low quality types. This ensures that only high quality types will choose to acquire the signal, making it a credible indicator of quality.

A Signal Only Works When