Which of the Following Is an Example of Signaling in a Market

question 37

Multiple Choice

Which of the following is an example of signaling in a market with asymmetric information?

• A) The certification of used cars by third parties
• B) Rent controls imposed by government
• C) Discounts offered by sellers during the holiday season
• D) The taxation of alcoholic beverages

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Definitions:

Sugar Prices

The cost per unit of sugar, which can fluctuate based on supply, demand, and other market conditions.

Regressive Income Tax

A taxation method where the tax rate falls as the amount being taxed grows.

Opportunity Cost

The cost of foregone alternatives, representing the benefits one could have received by taking a different decision.

Substitution Effect

The change in consumption patterns due to a change in relative prices, leading consumers to substitute one product for another.