When buyers cannot tell whether a product is high or low quality before making the purchase, high-quality items end up selling for _____, and low-quality items end up selling for _____ than if the buyer knew the quality before purchase.
A)more; less
B)less; more
C)the same; more
D)less; the same

Question

Quizplus · Accepted Answer

When there is asymmetric information about the quality of a product, buyers tend to be risk-averse and are unwilling to pay a premium price for a good that may turn out to be low-quality. As a result, high-quality items will sell for less than they would if buyers knew the quality before purchase, and low-quality items will sell for more. Therefore, the correct answer is B, where high-quality items end up selling for less, and low-quality items end up selling for more.

When Buyers Cannot Tell Whether a Product Is High or Low