Asked by Anthony Espino on Apr 26, 2024
Verified
Which of the following is TRUE about producers' willingness to offer warranties on products?
A) Producers are equally likely to offer warranties on high-quality and low-quality goods.
B) Producers are more likely to offer warranties on low-quality goods, because without the signal that the warranty provides, the low-quality good wouldn't sell.
C) Producers are more likely to offer warranties on high-quality goods, because the expected cost of repairs is lower for those goods.
D) Producers have an incentive to deal with third-party companies to provide the warranties, so that an "impartial" view of the product is given to the consumer.
E) Producers will not offer warranties in any market that suffers from asymmetric information.
Warranties
Legal guarantees from sellers that the product will meet certain quality and reliability standards, and offering repair or replacement if it does not.
High-Quality Goods
High-quality goods are products that meet or exceed customer expectations in terms of performance, durability, and satisfaction, often associated with higher standards of production and materials.
Product Quality
The characteristics and features of a product or service that bears on its ability to satisfy stated or implied needs.
- Gain insight into and critically evaluate the dynamics of market signals beyond academic contexts.
Verified Answer
ZK
Zybrea KnightMay 03, 2024
Final Answer :
C
Explanation :
Producers are more likely to offer warranties on high-quality goods because the expected cost of repairs is lower for those goods. High-quality goods are less likely to require repairs, so producers can offer warranties at a relatively low cost. Lower-quality goods, on the other hand, may require more frequent repairs, so offering a warranty could be too costly for the producer.
Learning Objectives
- Gain insight into and critically evaluate the dynamics of market signals beyond academic contexts.