With Asymmetric Information Firms Might Be Reluctant to Improve the Quality

question 51

Multiple Choice

With asymmetric information firms might be reluctant to improve the quality of their products because

• A) it costs them more to produce the better quality product.
• B) they are not able to completely capture the benefits of the improvement.
• C) consumers do not value the better product.
• D) consumers are better informed about the product and value the new product less.

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Definitions:

Comparability

A qualitative characteristic of financial information that allows stakeholders to identify similarities and differences between two or more sets of economic facts.

Faithful Representation

A fundamental qualitative characteristic in accounting, ensuring that financial information accurately reflects the economic events it purports to represent.

Financial Reporting

Generating documents that unveil the financial situation of a company to stakeholders, including managers, investors, and regulatory authorities.

Time Period Assumption

an accounting principle that divides an enterprise's life into small periods of time for reporting and analysis purposes.