Nicole wants to avoid buying a car that is a lemon. She takes a car she would like to buy to her mechanic before she purchases it. This is known as ?
Correct answer: A. screening
- A. screening
- B. signaling
- C. moral hazard
- D. adverse selection
Explanation
Screening is information gathering by the less-informed party, such as a buyer having a mechanic inspect a car. Signaling would instead involve the seller taking an action to demonstrate quality.
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