Because the Presence of a Warranty for a Good Is

question 79

Multiple Choice

Because the presence of a warranty for a good is a signal that the good is of high quality,

• A) consumers are willing and able to pay more for a good that carries a warranty.
• B) consumers are willing to buy goods if and only if the goods come with warranties.
• C) producers do not need to charge extra for warranties.
• D) producers can use warranties to sort out high-risk customers.
• E) producers must make warranties available on all goods.

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Definitions:

Stock Price

The cost of purchasing a share of a company's stock on the stock market.

Preferred Stock

A class of ownership in a corporation that has a higher claim on its assets and earnings than common stock, often with fixed dividends.

Dividend

A portion of a company's earnings, decided by the board of directors, to be distributed among shareholders.