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Which of the following must be true about a signal that is used to reveal private information in order for the signal to be effective ?

A. It must be “as seen on TV”

B. It must be free to the signaling party

C. It must be costly to the signaling party but less costly to the party with higher-quality product

D. It must be applied to an inexpensive product

Related Questions on Asymmetric Information & Trade Policies for the Developing Nations Mcqs

Which of the following is not true about how people make decisions ?

A. people give too much weight to a small number of vivid observations

B. People are sometimes too sure of their own abilities

C. All of these answers are actually true statements about how people make decisions.

D. People are always rational maximizers

E. People are reluctant to change their minds in the face of new information