To be useful as a signal in a market with asymmetric information,the signal must be ________.
A) easily available
B) inexpensive
C) tax deductible
D) costly to obtain

Question

Quizplus · Accepted Answer

For a signal to be useful in a market with asymmetric information, it must be costly to obtain. This is because, if the signal is easily available or inexpensive, both parties in the transaction are likely to have access to it and it will no longer be a useful indicator of the quality or value of the product or service being exchanged. On the other hand, if the signal is costly to obtain, it will mainly be accessible to high-quality or valuable products or services, and will therefore be a reliable signal for buyers to base their purchasing decisions on.

To Be Useful as a Signal in a Market with Asymmetric