A warranty offered by a seller is one way to overcome:
A)A warranty offered by a seller is one way to overcome:.
B)a negative externality problem.
C)an adverse selection problem.
D)a free-rider problem.

Question

A warranty offered by a seller is one way to overcome:
A)​A warranty offered by a seller is one way to overcome:.
B)​a negative externality problem.
C)​an adverse selection problem.
D)​a free-rider problem.

Quizplus · Accepted Answer

A warranty offered by a seller is a way to overcome adverse selection, which is the problem of asymmetric information where the buyer has less information than the seller about the product's quality. By offering a warranty, the seller signals that they have confidence in their product's quality, which can help to reduce the information asymmetry and increase the buyer's willingness to purchase the product. A warranty does not address negative externalities or free-rider problems.

A Warranty Offered by a Seller Is One Way to Overcome