Final answer:
The statement that only variable costs are relevant when deciding to eliminate a product is false. Both variable and fixed costs must be considered, as total revenue must cover total costs for a firm to earn a profit.
Step-by-step explanation:
The statement that only the variable costs associated with a product are relevant in a decision concerning whether to eliminate the product is false. When considering whether to discontinue a product, both variable and fixed costs must be taken into account. This is because, in the short-run, fixed costs are sunk costs that cannot be recovered; they are past expenditures that cannot be altered and thus shouldn't influence future production or pricing decisions. However, fixed costs should not be ignored entirely as they contribute to the total costs that need to be covered by total revenue for a firm to earn a profit.
Variable costs, on the other hand, are incurred during the act of producing and can be changed. They provide information about the firm's ability to cut costs in the present and reflect how costs will change if production levels change. Decisions should be based on the consideration of whether total revenue can exceed total costs, both variable and fixed.