Question

A lawyer who drives a beat-up car and wears frumpy clothes may have a hard time getting clients. Potential clients may conclude from his appearance that he is poor, and if he is poor, he probably is not very good. If this is true for a lawyer, dressing in expensive and stylish clothing is a way of:
a. signaling quality.
b. changing a nonexcludable good into an excludable good.
c. changing a nonrival good into a rival good.
d. internalizing externalities.

Answer 1

Answer:

A) Signaling quality.

Explanation:

People perceive lawyers who dress poorly, or in cheap clothes, as people who do not make a lot of money with their potentially lucrative profession. The objective validity of this perception is fallacious, but it still has real life consquences that legal professionals should avoid.

By simply dressing in expensive clothes, a lawyer signals that he or she is a quality lawyer because buying expensive clothes require large sums of money that can be earned through a quality work in the legal profession. (for example, winning difficult cases can be very profitable).