New Products Provide a Classic Case of the Consumer Information

Multiple Choice

New products provide a classic case of the consumer information problem. However, in some cases consumers partially solve the problem by trusting the "brand name" of the producer of the new product. Because firms spend millions of dollars advertising and maintaining their brand names, the likelihood of a "brand name" firm intentionally selling a dangerous or shoddy new product is

A) high because big firms are always after a quick dollar.
B) high because their brand name is a communal property right.
C) low because big firms do not make mistakes.
D) low because the firm with a brand name has a lot to lose if word spreads about bad consumer experiences.