Which of the following must be true about a signal that is used to reveal private information in order for the signal to be effective ?

A. It must be “as seen on TV”
B. It must be free to the signaling party
C. It must be costly to the signaling party but less costly to the party with higher-quality product
D. It must be applied to an inexpensive product

Correct Answer: It must be costly to the signaling party but less costly to the party with higher-quality product ✔

Last Updated: June 11, 2019