Signaling creates benefits by:
A) increasing information but also creates inefficiencies.
B) increasing information without creating inefficiencies.
C) decreasing moral hazard.
D) reducing inefficiencies.

Question

Quizplus · Accepted Answer

Signaling can increase information and help reduce uncertainly in transactions, but it also comes with costs and inefficiencies such as the cost of signaling and potential adverse selection if only certain parties are able to signal effectively. Therefore, while signaling can create benefits, it is not without its drawbacks and can also create inefficiencies.

Signaling Creates Benefits By