If the quality-detection costs are very low, _____.
A)low-quality products will tend to be withdrawn from the market, and the average quality will improve
B)low-quality products will tend to be withdrawn from the market, and the average quality will decline
C)high-quality products will tend to be withdrawn from the market, and the average quality will improve
D)high-quality products will tend to be withdrawn from the market, and the average quality will decline
E)the problem of adverse selection cannot be overcome

Question

Quizplus · Accepted Answer

When quality-detection costs are low, it becomes easier and cheaper for firms to identify low-quality products and remove them from the market. As a result, the average quality of products on the market will improve as low-quality products are eliminated. Therefore, choice A is the best answer.

If the Quality-Detection Costs Are Very Low, _____