Ramsey prices for a budget-constrained (breakeven) multi-product firm

Ramsey prices for a budget-constrained (breakeven) multi-product firm will allow the same welfare loss per dollar of contribution to fixed costs for every product.

Indicate whether the statement is true or false

ANSWER

T Optimal prices for the multi-product firm, which must exceed marginal costs in order to yield enough contribution to cover fixed cost, should be adjusted until the contribution to fixed cost per unit of revenue is the same for each product. If this was not true, an adjustment in prices could allow more contribution with less welfare loss. Prices that reach that standard of equal contribution per dollar of revenue are Ramsey prices.