By establishing a reputation for high quality products, a firm:
A)is earning a higher rate of return than otherwise.
B)responds to asymmetric information between buyers and sellers.
C)is maximizing profits.
D)sets up the customers for future cheating.

Question

Quizplus · Accepted Answer

By establishing a reputation for high quality products, a firm responds to the asymmetric information between buyers and sellers. Asymmetric information refers to a situation where one party in a transaction has more information than the other party. In this case, the firm has more information about the quality of its products than the buyers. By establishing a reputation for producing high-quality products, the firm is reducing the information asymmetry between the buyers and the sellers. This is beneficial to the buyers as they can make informed decisions and are more likely to trust the firm, leading to increased sales and profits.

By Establishing a Reputation for High Quality Products, a Firm