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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Individual consumers, firms and markets are examined through demand and supply, elasticity, consumer choice, production, costs, revenue and the determination of prices and output. The topic also covers market structures such as perfect competition, monopoly and oligopoly, plus market failure, externalities and the distinction between microeconomic decisions and economy-wide outcomes.
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