Question

Total contribution is maximized in the basic price optimization problem at the price at which marginal revenue equals marginal cost.

Is this statement correct? why?

Answer 1

Contribution = Sales - Variable Expense

The given statement is true and this is because of the fact that leaving the fixed cost the maximum gap between the variable cost and the revenue is something that has the maximum profit or the maximum contribution and at the level of output where the marginal revenue = marginal cost, the gap between variable cost and revenue is maximum being revenue greater or the loss is minimum being variable expense greater.

Therefore 'True' is the answer to this question