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.

Question

Quizplus · Accepted Answer

The presence of a warranty signals to consumers that the good is of high quality, thus making consumers more willing to pay more for the good. This is because consumers perceive the warranty as a form of insurance, providing protection against future problems and increasing confidence in the product.

Because the Presence of a Warranty for a Good Is