When Consumers Cannot Judge Quality Because They Lack the Information

question 102

Multiple Choice

When consumers cannot judge quality because they lack the information or skill,price becomes ________.

• A) less important
• B) insignificant
• C) an important quality signal
• D) the only driver of the purchase
• E) negotiable

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Definitions:

Liquidity

The measure of how easily assets can be converted into cash without significant loss in value.

Balance Sheet

An accounting report that outlines a firm's assets, obligations, and owners' equity on a specific date.

Leverage Ratio

A financial metric indicating the level of debt relative to equity in a company's capital structure, used to assess the risk of investing in the company.

Acid-test Ratio

A financial metric used to evaluate a company's short-term liquidity, calculated by dividing liquid assets by current liabilities.