Free-market advocates would never suggest using signaling to solve problems of adverse selection.

Question

Quizplus · Accepted Answer

Free-market advocates believe that the price mechanism can alleviate adverse selection problems, but they do not rule out the use of signaling as a potential solution. Signaling is a way for individuals to convey information to potential buyers about their quality or willingness to engage in certain behaviors. As such, it can be useful in addressing issues of adverse selection, although free-market advocates tend to prefer relying on the market price as a signal of quality.

Free-Market Advocates Would Never Suggest Using Signaling to Solve Problems