When Consumers Cannot Tell the Difference at the Time of Sale

question 125

Multiple Choice

When consumers cannot tell the difference at the time of sale between high-quality products and those with defects, strong sales of the low-quality products will tend to depress price and drive the high-quality products from the market. Economists call this

• A) the curse of advertising.
• B) the imperfect information problem.
• C) the brand name problem.
• D) an open-access resource.

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Definitions:

Assembly Departments

Departments within a manufacturing facility where parts are assembled into final products.

Investment Opportunity

A potential venture, asset, or market where investing could yield profitable returns.

Required Rate of Return

The minimum return an investor expects to earn on an investment, considering its risk level and alternative opportunities.

Margin

The difference between the selling price of a product or service and its cost, expressed as a percentage of the selling price.