Sellers may choose not to sell a high-quality item when buyers are _____ to tell the quality in advance, and so the buyers _____.
A)not able; pay a high price hoping for high quality
B)not able; are not willing to pay the price of a high-quality product
C)able; pay a high price regardless of quality
D)able; pay a low price

Question

Quizplus · Accepted Answer

When buyers are not able to tell the quality in advance, sellers have an incentive to sell a low-quality item at a high price, knowing that the buyer cannot differentiate. However, if buyers are able to tell the quality in advance, sellers would face a market where low-quality products are not in demand, and so they would choose to sell only high-quality items at a high price. Therefore, if buyers are not able to tell the quality in advance, they may not be willing to pay the price of a high-quality product, as they cannot be assured they are receiving what they are paying for.

Sellers May Choose Not to Sell a High-Quality Item When