A home has been on the market for an extended amount of time without much interest from buyers. The sellers decide to purchase and include a home warranty insuring against major defects with the home. The warranty is an example of a(n)
A)signal.
B)screen.
C)moral hazard.
D)adverse selection.

Question

Quizplus · Accepted Answer

The home warranty is a signal to potential buyers that the sellers are confident in the condition of the home and are willing to back it up with a warranty. This may increase the attractiveness of the home and generate more interest from buyers.

A Home Has Been on the Market for an Extended