If quality-detection costs are very low,
A)lower quality products will tend to be outcompeted in the market, and the average quality will rise.
B)lower quality products will tend to be outcompeted in the market, but the average quality will fall.
C)higher quality products will tend to be outcompeted in the market, and the average quality will rise.
D)higher quality products will tend to be outcompeted in the market, and the average quality will fall.

Question

If quality-detection costs are very low,
A)​lower quality products will tend to be outcompeted in the market, and the average quality will rise.
B)​lower quality products will tend to be outcompeted in the market, but the average quality will fall.
C)​higher quality products will tend to be outcompeted in the market, and the average quality will rise.
D)​higher quality products will tend to be outcompeted in the market, and the average quality will fall.

Quizplus · Accepted Answer

When quality-detection costs are low, it is easier for consumers to differentiate between high and low-quality products. This creates a competitive advantage for high-quality products, which tend to be chosen over lower quality alternatives. As a result, lower quality products will tend to be outcompeted in the market, leading to an increase in the average quality of products available.

If Quality-Detection Costs Are Very Low