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Contribution margin is the amount left after covering variable costs. Other options are incorrect because The variable cost itself is not the contribution margin; The selling price is not the margin.
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Profit Maximization
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Definition
Profit maximization involves firms optimizing their resource allocation to achieve the highest level of profit. This process includes comparing the marginal revenue product of labor and capital to their respective prices, aiming for both ratios to be equal to one for optimal resource utilization.
Topic Definition
Profit maximization involves firms optimizing their resource allocation to achieve the highest level of profit. This process includes comparing the marginal revenue product of labor and capital to their respective prices, aiming for both ratios to be equal to one for optimal resource utilization.
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